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Kazakhstan: Many Obstacles To Pipeline Link Remain

A proposal to link Kazakhstan and Azerbaijan with a new oil pipeline has been gaining ground in the region with Georgia's attempts to promote the idea. Our correspondent Michael Lelyveld says that many hurdles remain before an extension of the Baku-Ceyhan line can be built.

Boston, 27 December 2000 (RFE/RL) -- A proposal to extend the Baku-Ceyhan pipeline to Kazakhstan has captured the imagination of officials in the region, but it may be harder to turn the idea into reality anytime soon.

Last week, the president of the Georgian International Oil Company, Georgy Chanturia, met in Astana with Kazakhstan Prime Minister Kasymzhomart Tokaev to discuss the option of an oil line from Baku to Kazakhstan's port of Aktau on the opposite Caspian shore.

The idea seems to stem from a comment by President Nursultan Nazarbayev in October during a visit by Turkish President Ahmet Necdet Sezer. At that meeting, Nazarbayev unexpectedly proposed that the Baku-Ceyhan project be renamed the Baku-Aktau-Ceyhan oil line, signaling his intention to ship Kazakh oil over the east-west Caspian route.

Since then, the plan has been the subject of numerous reports, based on several versions of the idea. Earlier this month, the Financial Times quoted U.S. officials as having renamed the oil route to include Kazakhstan's northern Caspian port of Atyrau instead of Aktau. But a map that accompanied the report showed a dotted line across the Caspian, connecting Baku with Aktau, not Atyrau.

The official Iranian news agency IRNA reported more improbably that the proposal was to extend the Baku pipeline to Astana, Kazakhstan's capital city, which is hundreds of kilometers from Caspian oil.

The varying reports suggest that little is known or settled about the plan. Yet, all accounts agree on the reasons for the idea. While Kazakhstan seeks assurance that it will have enough export routes for its giant Kashagan offshore field when it starts to produce oil, the backers of Baku-Ceyhan are eager to attract the oil to make the pipeline commercially viable.

Since November, U.S. officials have repeatedly encouraged Nazarbaev to either pursue the pipeline proposal or make some other firm commitment to Baku-Ceyhan. Georgia has been particularly active in pressing Kazakhstan on the issue of the pipeline extension, in hopes of collecting more transit fees.

Last August, Georgian President Eduard Shevardnadze reported that Nazarbayev intended to ship 20 million tons of oil annually through the Baku-Ceyhan line, but that statement fell short of a contractual pledge. Since then, Kazakhstan has also discussed building a pipeline to Iran, as well as swapping oil through Iran and increasing transit through Russia.

So far, there have been few details of the Baku route for Kazakh oil, if it comes. But the choice of Aktau as a point of origin implies shipment through a trans-Caspian oil line. Most reports have not used those words, apparently because trans-Caspian projects have faced problems in the past. Plans for a trans-Caspian gas pipeline from Turkmenistan have been stalled for the past year by President Saparmurat Niyazov's insistence on better terms and disputes with Azerbaijan on shares in the line. The issues of Caspian borders and a legal division also remain unresolved.

The idea of an oil line across the Caspian has been dormant since early 1998, when U.S. officials last tried to convince Turkmenistan to take part in the plan. For the previous two years, the administration of President Bill Clinton had promoted the idea of Baku-Ceyhan as a link in a larger east-west energy corridor that would stretch all the way to Central Asia.

But in late 1997, some officials threatened to shift the trans-Caspian oil route to Kazakhstan because of Turkmenistan's reluctance to participate, even though the distance from the Kazakh shore would be longer to Azerbaijan. The officials argued that Kazakhstan and Azerbaijan were then "the only two U.S. partner countries on opposite shores which do not have a border quarrel."

The idea of a trans-Caspian oil project gradually faded, although officials continued to press for a gas line from Turkmenistan. Until Nazarbayev's statement, officials had spoken for the past two years only in terms of barging Kazakh oil across the Caspian to Baku. But now, the proposal appears to have been revived by Nazarbayev's comments, as Baku-Ceyhan backers pursue the goal of drawing oil to the east-west pipeline.

The prospect still seems distant, however. The questions of firm cost estimates, engineering and financing all remain to be answered in a region where many pipelines are proposed but few have been built. If progress on Baku-Ceyhan seems slow, the pace of developing a line from Aktau is likely to be even slower, considering that agreements have yet to be negotiated and signed. Kazakhstan has already been barging oil to Azerbaijan successfully for shipment through Georgia for several years. Nazarbayev has said that he plans those shipments to increase.

Any attempt to reach Baku by piping Kazakh oil around the Caspian would mean crossing Russian territory. While Moscow has not addressed the issue, it has previously opposed Baku-Ceyhan. So far, the reports of talks between Georgia and Kazakhstan have barely touched on the Russian position.

The combination of obstacles make it appear that the extension of the Baku-Ceyhan pipeline to Aktau may be a goal based on the desirability of the route. It may take more time before the pipeline proposal can be developed into a concrete plan.