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Caspian: U.S. Envoy Rejects Report On Baku-Ceyhan Pipeline

U.S. officials face criticism in Washington over the effectiveness of Caspian pipeline policy during visit to the region. But a review of recent events suggests that the goal of an east-west energy corridor still depends more on the countries of the region and the oil companies and less on what Washington wants. RFE/RL correspondent Michael Lelyveld looks at the issues.

Boston, 29 August 2000 (RFE/RL) -- A U.S. envoy on Caspian affairs has rejected a highly critical report on U.S. energy policy for the region, arguing that it is still possible to build the Baku-Ceyhan pipeline by 2004.

Speaking in Ankara last week, Ambassador John Wolf, the U.S. special adviser on the Caspian, disputed the report by the Washington-based Center for Strategic and International Studies that called the pipeline policy "unrealistic and overoptimistic."

The Turkish press carried accounts of the report by Bulent Aliriza, a senior scholar at the CSIS think-tank and an expert on Turkey, on the same day that Wolf began a trip to the region to promote U.S.-backed pipeline projects. Wolf is scheduled to join U.S. Energy Secretary Bill Richardson today (Tuesday) in a visit to Kazakhstan, which is a potential source of oil for Baku-Ceyhan. Aliriza argued that all aspects of the Caspian policy should undergo a "thorough review."

But Wolf denied the report's conclusion that the U.S. effort to establish an east-west energy corridor through Caucasus has been a failure. Without naming Aliriza, Wolf told a press conference that the opinions were not those of the CSIS but only of an individual analyst who he said has been "consistently wrong and mistaken," the Turkish Daily News reported.

Behind the controversy is a concern that has been smoldering for years over the activist role that the U.S. government has taken in promoting the energy corridor and Wolf's relentless pursuit of the goal.

In the past, Wolf and other officials have faced frequent criticism for their efforts to persuade oil companies that Baku-Ceyhan and the trans-Caspian gas pipeline from Turkmenistan should be built for strategic as well as commercial reasons. Industry analysts have argued that the commercial decisions of the companies and the countries in the region should be the sole factors in determining whether the projects proceed.

That difference has led to a long-standing split between officials who stressed the reasons for building the pipelines and analysts who focused on reasons why they were unlikely to be built.

In the case of Baku-Ceyhan, Wolf and Aliriza agree that the critical issue is whether enough Caspian oil will be available to justify construction of the line, which is designed to carry about 1 million barrels per day. Wolf continues to voice confidence that enough oil will be found. Aliriza doubts that there will be enough by 2004, and that in any case, the oil may move by Russian or Iranian routes.

But the split between U.S. officials and the oil industry took an unexpected turn last October when oil giant BP Amoco announced that it was ready to pursue the Baku-Ceyhan plan. Some analysts argued that the decision was little more than a tactic aimed at easing official pressure. But reports continue to surface that BP and other companies are ready to take shares in the company that would build the pipeline.

The idea that U.S. strategic interest alone is driving Baku-Ceyhan seems to ignore the strong push for the project from Turkey, Azerbaijan, and Georgia. One BP official has cited the line's importance to the government in Baku as a persuasive reason for going ahead.

Such considerations cannot overcome commercial factors, but they can make a difference, particularly if the signs of returns from the Caspian are mixed and if oil prices remain high. Countries along the planned east-west corridor seem as interested as ever in export routes that are not reliant on Russia or Iran.

Expansion of the existing Baku-Supsa oil line through Georgia could serve Azerbaijan's export needs in the medium term in combination with other routes, but it seems too soon to say that it will become a substitute for the goal of Baku-Ceyhan.

In the case of the trans-Caspian gas line, the underwater project still faces an even longer list of hurdles. But Turkmenistan President Saparmurat Niyazov has recently shown new interest in pursuing the project with Royal Dutch/Shell. As with Baku-Ceyhan, Ashgabat's motive is the desire for routes other than those through Russia or Iran.

In the end, the success of the U.S. pipeline policy is likely to depend far less on how much Washington wants it and more on the goals of the Caspian countries and the oil companies. If they want east-west pipelines enough, they will have to make major compromises to make them work. In that regard, little has changed over the past five years since the U.S. initiative started, and the realization of the east-west energy corridor still seems too close to call.