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Turkey: Backers of Russia's Blue Stream Pipeline Project to Go Ahead

Despite economic troubles in Turkey, the developers of Russia's Blue Stream gas pipeline vowed last week that the project will go ahead. But success may depend on the country's recovery and plans for new transit links to Europe. Our correspondent Michael Lelyveld reports.

Boston, 23 June 2001 (RFE/RL) -- Russia's partner in building a gas pipeline across the Black Sea to Turkey has insisted that the project will start on 25 June and be finished next year.

Speaking in Istanbul, the head of Italy's ENI oil company said the Blue Stream gas project is set to begin immediately with dredging the sea floor off Russia's coast.

Pipe will be laid in September at depths of 2,150 meters, making it the deepest underwater pipeline in the world, ENI's Vittorio Mincato said.

The statements are not new, but they may bear repeating because of widespread skepticism about the $3.2 billion project.

Much of the doubt is based on problems in Turkey, where the economy has plunged since a political crisis in February. The situation has only recently shown signs of easing with the pledge of loans from the International Monetary Fund, but the pace of recovery remains uncertain.

Concerns have been compounded by Turkey's sweeping corruption investigation, code named White Energy, which has focused on contracting and payments related to Blue Stream. Court hearings on the probe are scheduled for next month.

The twin troubles could both put a damper on Blue Stream. While the economy may have slowed Turkey's gas consumption, the investigation has stalled Turkish energy investment since last year.

Officials of the Turkish state pipeline company Botas have left the impression that they would not be distressed by a delay in gas deliveries. Turkey's parliament has yet to complete legislation for the project, and some shipments of pipes for the underwater section have been late.

In recent weeks, the project has also come under fire from critics who fear that it will create security problems by making Turkey too reliant on Russia for gas.

The schedule for completion has already been set back several months. In May, Botas officials said the first gas would start to flow in January or February of 2002 instead of late 2001 as planned. Russia's Gazprom later modified the statement to say that deliveries would start in the "first three months" of next year.

Speaking at the Istanbul conference, ENI's Mincato may have stretched the date further, saying only that "testing" of the 380-kilometer undersea line would take place "at the end of March 2002."

But if the timing may be slipping, ENI is adamant that the project will take place despite the problems. The company has put its reputation on the line.

Mincato said: "I would like to remind those who once referred to this project as Blue Dream that we are not dreamers, and when we [make] a commitment, you can be sure we will live up to it. This is not the first time we manage to carry out projects that others thought impossible."

But despite ENI's determination, there has still been no complete picture of how the pieces of the Turkish energy puzzle fit together. Officials have turned silent about their attempts in May to delay the delivery of Iranian gas, which is also scheduled to flow through a new pipeline at the end of next month.

Since Turkey complained that Iran had failed to meet the technical terms of their contract, several confidence-building visits have taken place. But it remains unclear whether Turkey can absorb all the gas it has promised to import. Azerbaijan is also relying on Turkey as a market for Caspian fuel.

Attention is turning to Turkey's ability to serve instead as a transit country for gas flows to Europe. According to a report in March by the Washington-based Western Policy Center, construction of a $10 billion pipeline project between Turkey and Greece is expected to start next year with help from the European Union's INOGATE program.

In the long term, pipelines through Turkey to Europe seem inevitable. But how quickly they will be built remains to be seen.

In the meantime, Turkey seems likely to go through more months of uncertainty while pipeline projects forge ahead. The costs could be high unless economic recovery and transit links to Europe follow soon.