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Romania: Conference Pitches Bid For Caspian Oil Pipeline To Constanta Port

Bucharest, 28 September 1998 (RFE/RL) -- The U.S. government is disagreeing with an Italian oil firm about whether a new oil pipeline should pass through Serbia to link the Black Sea with the Adriatic. The issue arose last night at the opening of a Bucharest conference highlighting Romania's aspirations to become a transit point for Caspian oil deliveries.

Romania is seeking investors to help build a pipeline that would connect its Black Sea port at Constanta to the Italian port at Trieste. At least two prospective routes are being studied under an accord between Bucharest and the Italian oil firm Eni.

At the opening of the Bucharest conference, Eni President Guglielmo Moscato endorsed a route through Serbia, Croatia and Slovenia, to the Eni terminals at Trieste. From Trieste, Moscato said Caspian oil could flow through existing pipelines to Central European markets.

But U.S. Ambassador James Rosapepe, speaking minutes after Moscato, emphasized that an alternative route around Serbia had strong potential "economically and politically." The alternative route would pass through Hungary, Croatia and Slovenia.

This week's conference in Bucharest gathers international oil executives together with state officials from Eastern Europe, the Caucasus and Central Asia. Government delegates include Georgian Transport Minister Merab Adeishvili, Azerbaijani Vice Prime Minister Abid Sharifov, Ukrainian First Vice Prime Minister Anatoli Golubcenko and Moldovan Prime Minister Ion Ciubuc. Oil companies that have sent delegates include Eni, Royal-Dutch Shell, the U.S.-based Amoco, France's Elf, Russia's Lukoil and Azerbaijan's state-owned Socar.

The event comes as U.S. Energy Secretary Bill Richardson prepares to launch a diplomatic campaign to settle political fighting that has slowed the development of pipelines for Caspian oil exports.

The Azerbaijani International Oil Consortium, composed of 11 international oil firms and Socar, is expected to announce its decision on a main export route for Azeri crude next month.

Washington, Ankara and Azerbaijan all favor a pipeline from Baku through Georgia and on to Turkey's Mediterranean port at Ceyhan. That route would mean Romania, Bulgaria, Moldova, Ukraine and Russia all would miss out on the lion's share of transit fees for Azeri exports.

But Azerbaijan's President Heydar Aliyev has said that oil originating from other Caspian regions, such as Kazakhstan's Tenghiz oil fields, still would have to be shipped across the Black Sea from the Russian port of Novorossiysk and Georgia's port at Supsa.

Meanwhile, Turkey is anxious not to increase the number of oil tankers passing through its already congested Bosphorous strait. That would leave room for Bulgaria, Romania, Moldova and Ukraine to pass along Black Sea shipments out of Novorossiysk and Supsa.

Dan Capatina, an advisor to Romanian President Emil Constantinescu, says the whole concept behind the Bucharest conference is to get the idea of a transit route through Constanta onto the maps of international planners.

Capatina said Romanians were greatly disappointed that Constanta was not even mentioned at an international oil conference in Washington a year ago. Nor was Romania mentioned at a conference of European Union energy ministers last year.

Capatina said Bucharest is now in the middle of an enormous political and diplomatic effort to bring Romania to the attention of the international community - not only for oil transit, but for shipping goods between Europe and Asia on the so-called New Silk Road.

But Romania's lobby effort is coming at a difficult time. Foreign firms are increasingly wary about involvement in emerging markets because of the financial crises in Russia, Asia and Latin America.

Meanwhile, a glut of oil on world markets has caused crude prices to fall to near a ten-year low. Predictions that oil prices will stay depressed for at least another two years are causing anxiety within the oil industry. Shell recently decided to close its headquarters in four European countries. The takeover of Amoco by British Petroleum last month has triggered speculation that there could be a wave of other mergers.

Cost cutting is on the minds of the world's leading oil executives as they prepare to meet in Venice later this week for talks on the future of their industry - including the development of Caspian reserves.

Meanwhile, Romania's record on market reforms has given the country a bad reputation among potential foreign investors. Privatization has been slow, and there are allegations of rampant corruption.

The International Monetary Fund (IMF) let a $530 million lending accord expire in May because of Bucharest's dithering on reforms. Talks on a new IMF agreement were shaken further by last week's dismissal of Finance Minister Daniel Daianu, who was seen as the country's leading impetus for reform.

But one thing has become clear already at the Bucharest oil conference: Export routes for Caspian Sea products depend not only on economics and physical geography, but ultimately on international politics.