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Russia: U.S. Wants Multiple Pipelines For Caspian Oil

Washington, 11 March 1998 (RFE/RL) -- One of the senior U.S. officials participating in this week's meeting of the Gore-Chernomyrdin Russia-U.S. binational commission, Jan Kalicki, has been working feverishly in recent months to assure that there are at least two main pipelines built to carry Caspian Sea oil to world markets.

The point is an important one for Russia, which has the largest existing pipeline running from Baku, Azerbaijan north to Novorossisk on the Black Sea. Russian officials naturally want that to be the main line to carry the expected gusher of oil to come from the region in coming decades.

But the U.S. and a number of other Caspian nations do not want Russia to control the only pipeline leading out of the region. While the route through Russia passes through Chechnya, with attendant dangers, it is the most direct and economical currently available.

The U.S. says there will be enough oil to keep that pipeline and several more profitable and wants to see a major southern pipeline to run from Baku through Georgia and then down into Turkey, ending at the Mediterranean port of Ceyhan.

The U.S. argues that this would help avoid moving a major part of the oil via oil tankers through the already environmentally threatened Bosporus straits. But Kalicki, who is the Clinton administration's ombudsman for energy cooperation with former Soviet states, told Turkish officials recently that if the Ceyhan route is to be commercially viable, Ankara must move quickly to provide new domestic markets for the oil -- and eventually natural gas -- as well as helping to reduce pipeline costs overall.

Speaking at a private meeting of the American Turkish council, Kalicki said Turkey and the other countries through which the pipeline would transit can help make the project commercially viable by giving "tariff and tax breaks, attractive insurance and financing costs, and assistance in procuring rights of way."

Any pipeline, Kalicki said, "must make sense commercially" because it is the private sector "that will make the investments and take the risks."

He said the Baku-Ceyhan pipeline via the Caucasus, especially once natural gas can be transported too, would be competitive with transit through Iran as well, carrying gas from Kazakhstan, Uzbekistan, Azerbaijan and even Russia.

Iran is a major concern of U.S. officials, especially since Turkmenistan recently opened a natural gas pipeline from Korpedzhe to Kurdkui and is talking with Iran about oil swaps. Those would include deliveries of 14 million tons of Turkmen crude oil a year to refineries in northern Iran, with Turkmenistan being paid from exporting equal amounts of Iranian oil south through the Persian Gulf.

Kalicki told Turkish officials that Iran is trying to "compete with Caspian countries and with Turkey" both as a supplier and transit country. He said from a security standpoint as well, "the drawbacks of sending more oil through Iran and the Strait of Hormuz are readily apparent."

The U.S. has broad sanctions against Iran and American firms are generally prohibited from participating in energy projects that involve investments of more than 20 million dollars.

Kalicki suggested that in addition to lowering transit costs for a Baku-Ceyhan pipeline, Turkey should quickly decide on building new oil and gas fired power plants to increase its own domestic consumption. That would help Turkey play a "pivotal role" in the selection of a southern pipeline route, he said.

Kalicki said the Baku-Ceyhan route would be even more economically attractive if a connecting trans-Caspian pipeline is build under the sea itself. This would allow oil and gas from the east side -- from Turkmenistan and Uzbekistan -- to be combined with production from the west side for shipment.

Kalicki was recently in Russia and Ukraine to discuss the pipeline routes and he said development of multiple transport routes "is in Russia's interest." He said the U.S. expects "increasing agreement" on this, particularly in the Gore-Chernomyrdin meetings.

Russia was irritated that it wasn't invited to a Turkish-hosted meeting of Caspian basin countries two week-ends ago where Azerbaijan, Georgia, Kazakhstan and Turkmenistan endorsed the Ceyhan route.

But while miffed, Russia then suddenly settled a customs dispute that had kept the first consignment of Azerbaijan Caspian oil from passing through its northern pipeline.

Experts in Washington say broad agreement on the multiple pipeline approach may be even easier after Turkish Foreign Minister Ismail Cem recently floated the idea that "all regional states", including Russia, might receive a cut of the profits from a Ceyhan pipeline. Kalicki is trying to convince his Russian counterparts that the multiple pipeline approach can work for everyone.