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Caspian: Russia Softens Opposition To Baku-Ceyhan Pipeline

After years of opposing the Baku-Ceyhan pipeline from the Caspian, Russia may now be taking the attitude that it poses no threat to its own plans. The possible change comes as Georgia has proposed a project that could promote cooperation between competing export routes.

Boston, 6 March 2001 (RFE/RL) -- Russia may be softening its opposition to a U.S.-backed oil pipeline from the Caspian Sea at a time when the project seems to be nearing a decisive phase.

In an interview published late last month, Russian Deputy Foreign Minister Viktor Kalyuzhny said the planned line from Baku to Turkey's port of Ceyhan will not affect Russian interests because the oil would be sold in different markets than the ones that Russia serves.

Kalyuzhny, who is Russia's envoy on the Caspian, told Vremya Novostei that the oil from the Baku-Ceyhan pipeline would supply the United States. Kalyuzhny suggested that the project would not compete with Russia, which seeks to export its oil to Europe and Asia.

The statement was remarkable, in part because it seems to have no basis in fact. Officials of Azerbaijan's "deal of the century" oil project have been saying for years that oil from Baku-Ceyhan would be used at refineries in southern Europe. Industry sources say they know of no change in plan.

Whether it is accurate or not, Kalyuzhny's appraisal stands in contrast to earlier Russian positions on the pipeline. Most notably, in 1999, Russian Defense Minister Igor Sergeev accused the United States of pursuing policies aimed at ousting Russia from the Caspian.

It is unclear whether Sergeev or Kalyuzhny represented Kremlin policy or simply their own views. But the latest Russian reaction to Baku-Ceyhan comes at a curious time.

In the past week, officials of Georgia, Turkey, Azerbaijan, and Kazakhstan signed a memorandum of understanding in Astana on transporting oil through the pipeline. Reports varied on the significance of the pact, since it relies on commitments by oil companies that have yet to be made.

But the signing, which was witnessed by the U.S. envoy for the Caspian, Elizabeth Jones, provided another opportunity for Kazakh President Nursultan Nazarbaev to voice his support for the pipeline and his wish to use it as an export route for the country's giant Kashagan offshore oilfield.

"The producers' group will determine for itself the best transportation route, but I believe they will do so in consultation with President Nazarbaev and his government," Jones told Agence France Presse.

Last week, the sponsors of a preliminary engineering study for Baku-Ceyhan declared that it was halfway complete amid reports that several other companies may be ready to join in support.

Perhaps just as important, Britain's BP oil company is now reported to be giving its full backing to the project, arguing that there will be enough Caspian oil to fill the pipeline, whether Kazakh oil is committed or not.

Petroleum Argus, a London-based industry newsletter, said the position represents a major change for BP, which was previously suspected of only "paying lip-service to Baku- Ceyhan" in order to please the governments of Azerbaijan, Georgia, and Turkey.

Although none of these developments may account for Kalyuzhny's conciliatory statement, each may be a small point in favor of Baku-Ceyhan that could bring it a step closer to reality.

But the greatest influence on Moscow's thinking about the pipeline is the idea that it could provide Russia with an alternate route for oil that it hopes to export from its Black Sea port of Novorossiysk.

Giorgi Chanturia, president of the Georgian International Oil Corporation, recently proposed a plan for building a pipeline connection between Novorossiysk and the Baku-Ceyhan route. The $450-million spur line would run along the Black Sea coast, according to the Financial Times Energy Newsletter and AMBO, a source of Caspian news. Some analysts have long believed that such a line would be a solution to the conflicts over a main export route from the Caspian.

The advantage for Russia is that it would ease congestion for oil exports through the Bosporus after a new pipeline from Kazakhstan to Novorossiysk opens later this year. The link could allow Russia to export directly to the Mediterranean. It could also ship oil through the Georgian port of Supsa to Black Sea countries when Novorossiysk is closed due to bad weather during winter months.

Chanturia estimates that the investment could save Russia $400 million to $500 million a year over other proposals to bypass the Turkish straits. Among other benefits for Georgia, it would increase oil traffic through the country and end the politically-damaging tensions over Baku-Ceyhan.

It is not known whether Moscow is considering the Georgian option, or whether it believes that Baku-Ceyhan has gained too much momentum to stop. But Russia may be acting from a combination of motives as it deliberately downplays the competitive threat to its own pipeline plans.