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Iran: Cross-Border Issues May Be Obstacle To Oil Exports

Competition for Caspian oil exports may increase Iran's role in the region, but cross-border issues could stand in the way. RFE/RL correspondent Michael Lelyveld explores the topic in this report.

Boston, 8 May 2000 (RFE/RL) -- Kazakhstan has given the United States new assurances that a pipeline to Turkey will receive high priority if further oil resources in the Caspian are found.

Jan Kalicki, a U.S. government adviser on the Caspian, said last week that Kazakhstan President Nursultan Nazarbaev sees completion of a pipeline from the Tengiz oilfield to the port of Novorossiysk as the country's first order of business.

Speaking to reporters in Ashgabat, Kalicki said: "Priority number two is to find oil and send it to go to Baku-Ceyhan."

The assurance that came during a meeting with Nazarbaev last week follows a report that Iran is holding talks on a 1,500-kilometer pipeline that could carry Kazakh oil south to the Persian Gulf.

Competition is intensifying as Caspian countries await the results of drilling at Kazakhstan's offshore Kashagan field, which could prove to be one of the largest oil deposits in the world.

Oil from Kashagan could help to fill the U.S.-backed line from Baku to Ceyhan, while Russia wants the oil to flow through its own network, including a bypass line recently completed around Chechnya.

Iran is now making its own bid with a southern line that it says would cost $1.2 billion, or half the price of the Baku-Ceyhan project. Details of Iran's plan are unclear, but it appears to be similar to a Chinese proposal unveiled in 1997 as part of a $9.5 billion package of investments in Kazakhstan. Few of those deals have come through.

But Iran's competition highlights the increasing focus on north-south export options for the Caspian, while the United States, Turkey and Azerbaijan continue to press for east-west routes.

Iran has also been promoting oil and gas exports from Azerbaijan with pipelines from Baku to Tabriz. Despite Azerbaijan's preference for Baku-Ceyhan, it has not ruled the Iranian idea out.

In March, Azerbaijani officials including Ilham Aliev, vice president of the state oil company SOCAR, made clear that they could support an Iranian option, particularly if Baku-Ceyhan is delayed. Iran has also offered to pay for rebuilding a Soviet-era gas line from Baku and buy up to 8,000 million cubic meters of Azeri gas annually, according to the Baku Sun.

In recent weeks, relations between Iran and Azerbaijan appeared to be warming up for such a linkage in preparation for President Heidar Aliev's visit to Iran, now set for June 9. The trip has previously been postponed several times.

The preparations have led Iranian and Azerbaijani officials to deliver frank assessments of their countries' languishing bilateral trade. Earlier this month, Iran's ambassador to Azerbaijan, Ali-reza Bigdeli, blamed poor attitudes toward the private sector and shoddy goods, among other factors, for Iran's low exports.

On a visit to Iran in March, Azerbaijan Foreign Minister Vilayet Guliev promoted Iran's participation in Azerbaijani construction projects, including a new highway from Baku to Astara on the border. Automotive and agricultural projects were also hailed, as well as the possible pipelines, which would raise the level of trade dramatically.

But relations suffered an apparent setback last Thursday when Azerbaijan's ambassador was reportedly summoned to the Iranian Foreign Ministry to receive a protest over recent remarks by Guliev that were characterized as "irresponsible and meddlesome." The report by the official news agency IRNA quoted a ministry official as saying that Guliev had made an "ambitious" and "anti-Iran statement" regarding the Azerbaijan province of northern Iran.

Although IRNA did not repeat the statement, it apparently referred to Guliev's remarks in Washington two weeks ago. Guliev said that Azerbaijanis in Iran "are deprived of the right to have an education in their own language" and that they have no institutes of higher learning. Guliev said the issue was a matter of concern for the Azerbaijani intelligentsia in both Azerbaijan and Iran.

Ethnic links to Iran's large Azerbaijani population has been one of the underlying difficulties in opening borders and trade. Both sides have recognized tensions over the Iranian province, which some Azerbaijanis refer to as "southern Azerbaijan." Tabriz is the heart of the Azerbaijani population in Iran and was the scene of ethnic demonstrations and arrests as recently as January.

Guliev's statement, while relatively mild, may have touched a nerve in Iran at a sensitive time as both sides were feeling their way toward an energy deal. So far, Azerbaijan's Foreign Ministry has dismissed the entire matter, saying that its ambassador was in Baku, and so could not have been summoned in Tehran.

It is too soon to tell whether the incident will disturb the recent improvement in relations, but it may be a sign of the problems in forging north-south energy ties.