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Turkmenistan: Celebrates New Pipeline, But Must Look To Constancy

Boston, 30 December 1997 (RFE/RL) -- As Turkmenistan celebrates its new pipeline for gas exports to Iran, it may be time to remember that successful ventures depend on long-term commitments rather than just ceremonies and expressions of goodwill.

There seems little doubt that Iranian President Mohammed Khatami's first trip abroad to Turkmenistan this week represents a high point in relations between the two countries.

There is also hope that the pipeline inaugurated by Presidents Khatami and Saparmurad Niyazov will open the door for a far more important project, a gas line through Iran to Turkey.

That project, which is being studied by Royal/Dutch Shell, offers Turkmenistan the chance to do business with a dependable export market, which could bring benefits to the country for decades to come. But the key to success is dependability. While gas is plentiful, the commodity of constancy is often in short supply.

Iran's attempts to sell gas to Turkey are not really new. Some versions of the current agreement go back more than ten years, but little real progress on building a trans-Iran pipeline has been made. A year ago, in December 1996, a breakthrough was also reported when then-Iranian President Hashemi Rafsanjani visited Ankara during the government of former Turkish Prime Minister Necmettin Erbakan.

Since then, the ouster of Erbakan's Islamist government and Iranian anger over Turkey's ties with Israel forced the withdrawal of ambassadors.

Despite the current favorable publicity, the gas deal has progressed only slowly in the past year. It seems significant that Turkey's new prime minister, Mesut Yilmaz, attended ceremonies Sunday to mark a study of the pipeline to Turkey but left before the inauguration of the Korpedzhe pipeline to Iran.

Ultimately, the costly venture to build the 1,500-kilometer pipeline across Iran will depend on international finance, making it essential that the long-term reliability of all participants be assured. There is little that Turkmenistan can do to guarantee relations between Iran and Turkey, but it must do all it can to enhance its image as a steady supplier and business partner in this and other trade and energy deals.

The record of reliability in the region has not always been a good one. Not only in Turkmenistan, but also in Kazakhstan and Russia, agreements with foreign investors have been canceled or set aside.

Such cancellations are considered to be extremely damaging to the environment for international finance, which depends on stability and the rule of law, once agreements have been signed.

The international oil industry and its financial backers have always taken big risks to reap even bigger rewards. But risks must be kept at an acceptable level, or investment will go somewhere else where it is safer and a return is assured.

Countries like Turkmenistan cannot prevent political changes or business setbacks, especially in neighboring countries. But it is held accountable in the international community when it cancels agreements, such as that with the Argentine company Bridas to build a pipeline through Afghanistan to Pakistan.

Although Turkmenistan has made many arguments to support its decision against Bridas, the fact remains that its reputation for straightforward business dealings has suffered as a result.

Turkmenistan is certainly not alone when it comes to reconsidering deals. In August, Russia canceled an agreement with US-based Exxon Corp. to develop the Timan-Pechora oilfield in the far north of the country because of concerns that the company might be getting too good a deal. The decision reportedly cost Exxon $100 million in investment.

Ironically, international oil companies are now said to be redirecting their interests toward Central Asia and the Caspian Sea region because they have become disillusioned about doing business with Russia. There will be little advantage for the region if investors run into the same problems there.

Regardless of the outcome of the Bridas case, Turkmenistan should work to see that there are no similar setbacks on future oil and gas deals.

An equitable agreement should also be reached as soon as possible with Azerbaijan to resolve the republics' competing claims to the Kyapaz oilfield in the Caspian, also known as Serdar. This and other boundary disputes in the Caspian are complicating the already-difficult legal issues for offshore development and threaten to stall investment and finance.

It is encouraging that President Niyazov and President Heydar Aliyev of Azerbaijan have ordered a commission to find a solution to the dispute. But efforts should go beyond the current conflict to establish an atmosphere in which the political risk for investment is reduced, so that republics of the region can secure international financing and benefit from the business they attract.

Michael Lelyveld is national correspondent for the Journal of Commerce, an American newspaper. This analysis was written exclusively for RFE/RL.