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Turkmenistan: Trans-Caspian Consortium Closing

A report on the closing of the trans-Caspian pipeline consortium at the end of the month may be a sign of a fundamental shift in U.S. policy toward Turkmenistan and the Caspian region. RFE/RL correspondent Michael Lelyveld reports.

Boston, 20 June 2000 (RFE/RL) -- The consortium that was formed to build a trans-Caspian gas pipeline will reportedly end its operations at the end of this month.

On Friday, the London-based Petroleum Argus newsletter quoted "well-placed sources" as saying that PSG International is preparing to abandon its bid to build a gas pipeline to Turkey from Turkmenistan.

The news comes three weeks after the consortium of U.S.-based Bechtel Corporation and General Electric Company announced that it was closing offices and cutting spending because Turkmenistan had failed to respond to a final offer for the project.

Earlier this month, a GE official said the offer might be withdrawn but added that there were no plans to disband PSG.

The latest report may be seen either as the last chapter for PSG or the last warning for Turkmenistan President Saparmurat Niyazov that the trans-Caspian project is about to slip away.

There has been little good news for the 20-month-old consortium since last November when a framework agreement for the pipeline was signed at the OSCE security summit in Istanbul. One month later, Azerbaijan discovered gas in its sector of the Caspian, closer to Turkey. Since then, Turkmenistan's disputes with Baku and demands on PSG for better financial terms have plagued the project.

PSG improved its offer to Turkmenistan in March, but Niyazov has so far declined to renew the consortium's mandate, which expired five months ago. Although Royal Dutch/Shell joined PSG as a partner in the project last August, it not clear that it is prepared to continue alone.

Meanwhile, Niyazov has pursued his country's fortunes with Russia and Iran. A commitment in May to more than double Turkmen gas exports to Russia was seen as a blow to the U.S.-backed project. But so far, the Russian deal has failed to materialize because no price for the gas has been agreed upon. A similar effort to increase gas sales to Iran has also been stalled.

The uncertainty on all three fronts has led to indefinite delay, a situation which the reported PSG decision seems designed to change. Turkmenistan has a history of failed ventures. In the case of the country's planned pipeline through Afghanistan to Pakistan, Niyazov has continued to pursue the idea, even though at least two projects for the line have been cancelled.

It is unclear whether Niyazov will continue to treat the trans-Caspian project as a live option after it is dead, or whether he will publicly acknowledge that he has cast his lot with Moscow. Last week, Azerbaijan's state oil company SOCAR announced that talks on the project would be held soon with Turkmenistan. An agreement to continue negotiations was reportedly reached at the recent summit meeting of the Economic Cooperation Organization in Tehran.

But while Niyazov's tactics and their outcome are uncertain, the end of the month looks increasingly like a deadline for change in U.S. policy toward Turkmenistan. U.S. officials have been warning for weeks that Niyazov must make the next move on the trans-Caspian project and that Washington may have few other reasons to stay engaged with Turkmenistan.

Niyazov's government is seen as steadfastly undemocratic and hostile to reform. Whether or not the trans-Caspian project has merit as a business venture, it is one of the few threads connecting Niyazov to the West.

The administration of President Bill Clinton has only seven months left before it leaves office, making it likely to focus only on primary and achievable foreign policy goals from now on. Even if PSG stays in operation, there is little time left for the administration's plan to draw Turkmenistan into an east-west energy corridor.

If the east-west route is abandoned, or if it stops short of crossing the Caspian Sea, there may also be little left of Niyazov's official policy of neutrality, simply because there will be no western engagement to balance his links to Russia or possibly Iran.

It seems likely that the country will be drawn further under Moscow's shadow, both because of Turkmenistan's reliance on available pipelines and Niyazov's preference for authoritarian rule.

Such a course could mark an end to the five-year U.S. effort to shape the future of both the Caucasus and Central Asia through pipeline policy. If such a change is coming, it could become clear by the end of this month.