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2000 In Review: Caspian Development Achieves Mixed Results

The past year has been one of improved economic performance for the Caspian Sea region but little progress on major problems facing most countries. Experts say legal disputes, feuds and conflicts have clouded the outlook for major projects, while the lack of political reform has blocked the benefits of development to most citizens. RFE/RL correspondent Michael Lelyveld reports.

Boston, 15 December 2000 (RFE/RL) -- As the year 2000 draws to a close, experts see mixed results for the Caspian Sea region and oil development.

On one level, petroleum and pipeline projects are proceeding. Every country in the region recorded economic growth during the past year. World energy prices are high and Russia's neighbors have largely recovered from the effects of the 1998 ruble collapse.

But on another level, very few of the problems facing the Caspian countries and their citizens have been addressed or resolved. There seems to be little progress on sustainable development or any assurance that growth can be maintained if oil prices decline.

Robert Ebel, director of the energy and national security program at the Center for Strategic and International Studies in Washington, sums up the situation: "If you were to ask whether the average man benefited from any of the changes since the Soviet collapse, it would be very difficult to come up with a positive answer."

Ebel says, so far, oil development has helped only "a very thin layer at the top."

One reason may be that most Caspian countries continue to be ruled by leaders from the Soviet era. In Turkmenistan, for example, President Saparmurat Niyazov has barred opposition parties, eliminating any chance of criticism about how oil revenues are spent.

In Azerbaijan, President Heydar Aliyev and his majority party held onto power after a parliamentary election that was strongly criticized by the OSCE. The contested poll tarnished his image in the West at a time when much of the country is suffering energy shortages, despite Azerbaijan's oil wealth.

The larger strategic visions for the Caspian are also clouded. In the past year, the five shoreline states have remained at odds over a legal division of Caspian resources, despite a new push by President Vladimir Putin to resolve the issue on Russia's terms.

In recent weeks, the Russian initiative has led to increasingly open friction with Iran, complicating a contest that was previously seen as one between East and West.

But some energy experts believe Russia under Putin is having the most success in advancing its agenda in a region where all progress has been slow.

Julia Nanay, director of the Petroleum Finance Company in Washington, says Russia is making progress. She cites both Russian commercial ventures to deliver petroleum and perceived political pressure against rival export routes. Nanay puts it this way:

"They're (Russia) taking the European gas market and the Turkish gas market. And they're creating serious instability in Georgia, as well as in Azerbaijan."

Despite many plans, only one pipeline project has actually been completed in the past year: Russia's emergency bypass oil line around Chechnya, built during the war with the breakaway territory. But the project has been a story of failure as much as success because the war continues despite Putin's promises that it would be finished by last March. Although the bypass was completed to keep oil flowing to the port of Novorossiysk, the Russians have had trouble attracting enough oil to keep it filled.

Another important 748-kilometer section of the Caspian Pipeline Consortium project has also been completed to link Kazakhstan's Tengiz oilfield to Novorossiysk. The entire length of the 1,580-kilometer line, which is also supported by the United States, is due to be opened next year, forming the largest new export route from the region since the Soviet collapse.

At least one U.S.-backed project stalled this year, when Turkmenistan's Niyazov failed to approve plans for a trans-Caspian gas pipeline. Turkmenistan's feuds with Azerbaijan over Caspian division and shares in the pipeline put cooperation on hold. It remains to be seen whether Ashgabat can honor its pledge to supply gas to Turkey if the line is not built. Both Iran and Russia plan to pump gas to the Turkish market next year through new links, but it is not yet clear whether either will use Turkmen gas.

Opinions are also divided on the progress of plans for the Baku-Ceyhan oil line. In October, sponsoring oil companies agreed to finance a feasibility study for the project, which could lead to completion by 2004. The decision prompted the U.S. newspaper "The New York Times" to report that the 1,730-kilometer pipeline is "closer to reality."

Robert Ebel said that Baku-Ceyhan is making progress because "the U.S. government keeps pressing, pressing, pressing." But there are still questions about whether banks will finance the project unless more oil is found in the Caspian to fill the pipeline.

Those prospects suffered a setback in November when the Exxon Mobil and Shell oil companies announced that they may delay development of Kazakhstan's giant Kashagan oilfield until they can remove the high sulfur content of the oil. Supporters of Baku-Ceyhan have repeatedly held out hope that Kashagan could provide the needed volumes of oil for the pipeline that Azerbaijan lacks.

As a result, the outlook for Baku-Ceyhan remains much the same at the end of 2000 as it did a year before. According to Julia Nanay, "Politically, it's still very much alive, but economically, without the oil volumes, it's hard."