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Kazakhstan: Controversy Persists On Oil Pipeline To Iran

Kazakh Foreign Minister Yerlan Idrisov has raised further controversy over reported talks on an oil pipeline to Iran by denying the existence of an official statement that was the subject of the reports last week. Our correspondent Michael Lelyveld reports that the qualified denial may only have added to Kazakhstan's diplomatic embarrassment in dealing with countries that are competing for Caspian export routes.

Boston, 15 December 2000 (RFE/RL) -- Curiosity has deepened over reported talks between Kazakhstan and Western oil companies on building a pipeline to Iran after the country's foreign minister denied the basis for the reports.

Yerlan Idrisov in Almaty that his ministry had issued no official statement on the discussions, despite reports by both the Reuters and Agence France Presse news agencies that quoted from just such a statement last week.

Idrisov said, "This press release was not distributed by the Foreign Ministry, and the information published in the mass media does not coincide with reality," the Russian news agency Interfax reported. Idrisov insisted that "references to official Foreign Ministry documents are not valid," but he added that a "technical error" may have led to the release of a document, which he did not identify.

But the qualified denial did not appear to deny the substance of last week's stories on negotiations to form a consortium for a Caspian oil line to Iran. The foreign minister also did not contradict reports that Kazakhstan wants to speed up a feasibility study, or that it sees Iran as the "most economic and reliable" export route.

The reports of the Iran talks seemed to catch Kazakhstan in a difficult position. During the same week, Kazakh officials met with a visiting U.S. ambassador and voiced support for the Baku-Ceyhan oil route, which is backed by Washington.

On the same day that Idrisov issued his denial, Kazakhstan Prime Minister Kasymzhomart Tokaev also met in Almaty with Iran's deputy foreign minister, Sadeq Kharrazi, and called for pursuing the Iranian pipeline project, according to Iran's official news agency IRNA. The Kazakhstan government did not explain the apparent conflicts.

Further reports have focused on Kazakhstan's embarrassment over the events of last week and tried to provide an explanation of what went wrong.

According to Platt's Oilgram, an industry news service, both Idrisov's account and the news reports may be technically correct. Platt's explained that Kazakhstan has actually been holding talks on the Iranian route with Western firms for some time, although an unnamed Kazakh oil official stressed that negotiations are still at a "very preliminary stage."

The pipeline was mentioned in a Foreign Ministry report that was prepared for a meeting with one of the companies, Platt's said. A press spokesman passed the report on to a journalist. Platt's quoted a source "close to the government" as calling the release a "deadly mistake."

But while the public embarrassment seems to stem from having told different stories to Iranian and U.S. officials, the greater problem may be with Russia, which is also in the competition to provide routes for Kazakhstan's oil.

Russia now handles most of Kazakhstan's exports, but Astana is trying to plan for the time when it will have more oil than can be pumped through Russia's existing lines. That day could come in 2005, when Kazakhstan expects oil to flow from its giant Kashagan field on the Caspian shelf.

Kazakhstan is reportedly worried that even the capacity of the Caspian Pipeline Consortium route to Novorossiisk, which opens next year, will not be enough for Kashagan. Russia is also competing against Baku-Ceyhan with another route that would expand on its current line around Chechnya.

But Kazakhstan is worried about relying on Russia's capacity. Platt's quoted an official of the Kazakh oil company KazTransOil as saying, "If they can give it to us, they can also take it away."

At the same time, Kazakhstan is concerned that it may have trouble convincing Western oil companies to stick to the 2005 deadline for oil production at Kashagan. Some of the companies are concerned that the oil contains so much sulfur that they will have to deal with that problem first.

Last week, Kazakhstan President Nursultan Nazarbaev objected to the delay, telling a press conference that the Kashagan consortium would be in violation of its contract if it does not start production in 2005.

In one sense, Kazakhstan has shown its ability to plan for all these possibilities by trying to keep pipeline options open in all directions. But its diplomacy and public declarations appear to be so poorly managed that it may find it hard to gain an advantage in bargaining for competitive routes.