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Iran: Russia Disputes Caspian Oil Claims

Iran and Russia have been strengthening their relations this week during Iranian President Mohammad Khatami's visit to Moscow. But according to one American analyst, these two countries do not see eye-to-eye on one very important issue -- oil from the Caspian Sea basin. Our correspondent Andrew F. Tully reports.

Washington, 14 March 2001 (RFE/RL) -- A leading American expert on Caspian energy says Iran probably will not soon give up its 20 percent claim on the oil-rich region.

Elizabeth Jones -- until recently the special adviser on Caspian energy diplomacy to the U.S. president and his secretary of state -- made the comment Tuesday (13 March) at a seminar in Washington on Caspian oil.

Five countries border on the Caspian. They are Russia, Azerbaijan, Iran, Turkmenistan, and Kazakhstan. Iran wants each country to share equally in the sea's resources. Russia has proposed a division that would be proportional to the length of each nation's coastline -- and that would give Iran a 13 percent share of the Caspian.

Jones said Russia's minister of fuel and energy, Viktor Kalyuzhny, told her last week that he cannot persuade Iran to budge from its demand.

"He knows that Iran is sticking to its 20 percent position and he's sorry about that. He wishes he -- they could -- he could get them to work in a more realistic fashion."

In fact, most of the news coming from Moscow about the meeting was about Russia's increased weapons trade with Iran amounting to between $300 million and $400 million a year. Energy issues seemed limited to Russia's help in completing an Iranian nuclear power station.

Tuesday's seminar was hosted by the Carnegie Endowment for International Peace, a Washington think tank. Jones was joined by Edward Chow, a former U.S. oil company executive who now serves as an adviser to Georgian President Eduard Shevardnadze, and Martha Olcott, a specialist in the Caspian region who is affiliated with the Carnegie Endowment.

The seminar dealt with the broad issues of how soon oil from the Caspian region can be brought to market, and what the cost will be. Much of the session went over many of the problems that face the proposed Baku-Ceyhan oil pipeline. The conduit would stretch from the Azerbaijani capital of Baku, on the Caspian coast, then run through Georgia, and end in the Turkish port of Ceyhan on the Mediterranean Sea.

This pipeline would not go through Russia. Moscow has repeatedly complained that the forces behind the pipeline -- including the U.S. -- are anti-Russian.

At Tuesday's seminar, Jones said the Baku-Ceyhan pipeline is not anti-Russia, it's anti-monopoly, and that at the moment, Russia happens to hold a monopoly on shipping energy from the Caspian.

But Jones stressed that Russia does not necessarily lose if the new pipeline is built, saying there is plenty of oil in the Caspian to satisfy Western and Russian oil companies. And she said Western energy companies want their Russian counterparts to compete in the region.

On another subject, Jones said she has been challenged frequently by people who say Western democracies and business interests merely prop up corrupt governments in areas rich in natural resources like petroleum. She rejected that criticism, saying Western commercial participation in such a country actually can help create the basis for fair play in business there and getting its government accustomed to the rule of law.

According to Jones, local businesses dealing with international companies know, for example, that they must arrange for reasonable tariffs, transportation, port facilities, and other commercial matters.

"All of that also speaks to reducing corruption, it speaks to assuring a transparent business regime for the companies to be able to use."

Chow stressed that Western businesses do not need to make a point of lecturing local entrepreneurs and government officials about how to conduct themselves. He said an American oil company, for instance, should not allow itself to be seen as Washington's foreign policy tool -- especially if it has billions of dollars of investments at stake.

"Those things tend to put your investment in jeopardy one day."

Instead, Chow said, it is better for the company to set a good example in how it does business. Echoing Jones, he said companies and government officials that are accustomed to corruption will change their practices when they observe firms that have become wealthy through honest competition.