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Caucasus: Georgia, Azerbaijan And Ukraine Inaugurate Oil Pipeline

Prague, 20 April 1999 (RFE/RL) -- Azerbaijan and Georgia inaugurated a new pipeline for Caspian Sea oil during the weekend in the first of a series of pipeline routes intended to end Russia's monopoly as a transit point for oil to European and world markets.

Georgian President Eduard Shevardnadze, along with his Azerbaijani and Ukrainian counterparts -- Heydar Aliyev and Leonid Kuchma -- pushed a ceremonial button to begin filling an Italy-bound tanker anchored off the Black Sea port of Supsa.

The repair and completion of the 830-kilometer-long Baku-Supsa pipeline and the building of the Supsa terminal cost $565 million. It's the second of two lines which will carry more than five million tons of oil a year from Azerbaijan and its main foreign oil consortium in the next few years.

The first pipeline to Russia's Black Sea port of Novorossiisk has been plagued by difficulties in recent months, in part because its route passes through several politically unstable regions, including Dagestan and Chechnya. It is now no longer viewed as a reliable route for Azerbaijan to export its oil. At present, a 10-member multinational consortium, the Azerbaijan International Operating Company (AIOC), produces just over 100,000 barrels per day from one offshore platform. This capacity may be more than doubled, once the main production comes on line.

But Turkey has repeatedly warned that increased traffic by larger tankers through the crowded Bosphorus Straits would be an environmental hazard. Although the 1936 Montreux Convention restricts Turkey's ability to regulate traffic in the Straits, Turkey has warned that once Caspian Oil extraction reaches its peak, an overland route avoiding Istanbul will have to be found.

A variety of alternative routes are under consideration and one is under construction. Ukraine is building a pipeline linking its port of Odessa with the town of Brody on the main east-west Druzhba pipeline. Romania is considering construction of a pipeline from its port of Constanta to Hungary.

Bulgaria and Greece have expressed interest in building an oil pipeline linking the Bulgarian port of Burgas with the Greek Aegean port of Alexandropolis. And Turkey is trying to raise funding for a pipeline that would branch off the Baku-Supsa pipeline and head southwest across eastern Anatolia to Ceyhan. Ceyhan is the current terminal for a pipeline from Kirkuk in northern Iraq. But oil companies are in no rush to build Ceyhan for two reasons -- high costs and a continued glut on the world oil market.

In remarks at the opening ceremony, Shevardnadze emphasized the significance of the new pipeline in bypassing Russia, saying "today, we mark an event that is the forerunner to a new epoch in the history of my country."

Shevardnadze thanked Turkey for supporting construction of Baku-Supsa and promised to help Turkey in realizing its long-term goal of building the Baku-Ceyhan line.

U.S. special ambassador to the Caspian region Richard Morningstar, one of the leading advocates of Baku-Ceyhan, said at the Georgian ceremonies the Baku-Supsa pipeline may serve as "the cornerstone of an east-west corridor, that can promote economic cooperation and growth among all the countries of the Caucasus and Central Asia".

Last week, Morningstar attended a signing ceremony in Istanbul at which Turkey promised to cover additional expenses of the Baku-Ceyhan pipeline if the total cost is more than the projected $2.4 billion.

Aliyev in his remarks at Supsa rejected allegations that Azerbaijan has deliberately inflated estimates of oil reserves to attract foreign investment.

"Some circles, which want to hinder the realization of our oil strategy, have begun to spread misinformation that Azerbaijan was claiming to the world community that there was more oil in the Caspian Sea than actually was the case. These are all lies and fantasy."

Aliyev insists between 4,000 and 10,000 million tons of oil are to be found just in the Azerbaijani sector under the Caspian Sea.

Kuchma expressed the hope that the Supsa line could feed into the Odessa-Brody line to supply European consumers. He echoed the need for ending dependence in Russia as a transit route for oil.

"Oil is first of all a matter of big politics. Oil is the backbone of national security."

The Baku-Supsa pipeline is not without potential problems. It passes in close proximity to several unresolved conflict zones, including the ethnic Armenian-controlled Nagorno-Karabakh enclave and surrounding occupied territories.

In a bid to demonstrate determination to ensure the pipeline's security, Georgia, Azerbaijan, and Ukraine last week conducted a four-day joint military exercise near Tbilisi to practice joint efforts to ensure the security of the Baku-Supsa oil pipeline.

Itar-Tass says the exercise was conducted in three stages: imitation of a terrorist act to dynamite the pipeline; destruction of the terrorist group; and construction of a bypass pipeline to ensure continuous flow of oil. The exercise ended Saturday, the day the pipeline was formally inaugurated.