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Kazakhstan: Conflicting Reports Raise Doubts On Claims For Oil Routes

Kazakhstan said it has started talks on a possible feasibility study for an oil pipeline through Iran. The news may stir up Caspian competition, but Kazakhstan continues to send contradictory signals on pursuing export routes. Our correspondent Michael Lelyveld reports.

Boston, 11 December 2000 (RFE/RL) -- Kazakhstan has once again shaken up the competition for pipelines from the Caspian Sea with an announcement of plans for an export route through Iran.

In a statement last week (Wednesday), Kazakhstan's Foreign Ministry said it has opened talks with three Western companies on a feasibility study for an oil line through Iran to the Persian Gulf.

According to the ministry statement, "This pipeline could provide economical access to markets in the Asian and Pacific region through the Persian Gulf to oil producers working in Kazakhstan, particularly on the Caspian shelf."

But the news of the talks with TotalFina of France, British Gas, and Italy's Agip came just one day after positive statements about Kazakhstan's support for a rival pipeline route from Baku to the Turkish port of Ceyhan. The conflicting reports have raised doubts about which route Kazakhstan wants.

U.S. special envoy Stephen Sestanovich last week met in Astana with Foreign Minister Erlan Idrisov and praised Kazakhstan's commitment to Baku-Ceyhan. Sestanovich suggested that the route could be renamed Aktau-Baku-Ceyhan, adding the name of Kazakhstan's Caspian port.

That idea originated not with Sestanovich but rather with Kazakh President Nursultan Nazarbaev. In October, Nazarbaev first proposed extending the route to Aktau during a visit by Turkish President Ahmet Necdet Sezer to Kazakhstan. The statement buoyed hopes for Baku-Ceyhan, which is seen as needing Kazakh oil to be commercially viable.

At the time, Nazarbaev told Sezer, "We will support the project by supplying 15 million tons of crude oil from our newly opened reserves." In one of many contradictory statements, Nazarbaev promised Georgian President Eduard Shevardnadze last August that the figure would be a "minimum of 20 million tons." In November 1999, Nazarbaev also pledged 20 million tons of oil annually for the pipeline, but he then withdrew the promise, saying it was made under pressure.

But Nazarbaev has made no firm commitment of Kazakhstan's oil to either the U.S.-backed Baku-Ceyhan project or the Iranian route, turning his periodic announcements into a source of confusion more than anything else. U.S. officials have acknowledged privately that Nazarbaev's statements seem to be tailored to whatever visiting diplomats want to hear.

In fact, Russia has dominated Kazakhstan's exports and will likely continue to do so. Kazakhstan is expected to produce about 33 million tons of oil and condensate this year, using about 10 million tons at home. The country's export quota through a Russian pipeline to Samara is 14 million tons, the maximum that it can carry. Next year, a new pipeline through Russia to the port of Novorossiysk is scheduled to open. Its initial capacity of 28 million tons will give Russia enough to handle all of Kazakhstan's oil.

The competition is for Caspian oil that may still be far in Kazakhstan's future. Pipeline developers are counting on the country's Kashagan oilfield, which may be one of the biggest in the world. But two Western oil companies said last month that they may delay the project until they build facilities to handle the large amounts of sulfur and gas that are mixed with the oil. In spite of the setback, the pipeline competition goes on.

It is unclear whether the announcement on the Iran route is significant or only another political move. In 1997, China made headlines when it signed an agreement with Nazarbaev for $9.5 billion worth of oil projects, including the oil line through Turkmenistan to Iran. Nothing came of the plan.

In the meantime, Iran has been building an oil line from its Caspian port of Neka to its oil refinery south of Tehran to handle oil from Kazakhstan and Turkmenistan. Despite an agreement to process Kazakh oil and export it through swaps, almost no oil has moved. Iran said recently that it has spent $450 million on its part of the project, far more than forecast.

The Iranians have portrayed the Neka pipeline as the first phase of a larger project to carry Kazakh oil to the Persian Gulf. Recent reports estimate that the overall cost would be $1.2 billion to $1.5 billion, far less than Baku-Ceyhan.

But it is hard to say whether the announcement on talks is a sign of real movement or only a consolation for the problems in dealing with Kazakhstan in the past. Russia's continuing dominance over Kazakh exports and the delays at Kashagan suggest that any change may be slow.

Kazakhstan may also have lost a large measure of credibility for its conflicting statements on pipeline decisions, either through confusion or attempts to please all sides. Whatever the reason, competing projects will find it hard to rely on pledges that change from one month to the next.