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Caspian: Western Oil Companies Approve Construction Of Baku-Tbilisi-Ceyhan Oil Pipeline

After years of controversy, a group of nine Western oil companies has agreed to build the Baku-Tbilisi-Ceyhan oil pipeline. But the decision on the landmark Caspian project seems to have passed with little fanfare last week as the political rows over the route have eased.

Boston, 5 August 2002 (RFE/RL) -- An agreement to build the first major pipeline from the Caspian Sea met with little notice last week after years of political struggle over the U.S.-backed route.

At a board meeting last Wednesday, Italy's ENI oil company became the last of a nine-member consortium to approve construction of the Baku-Tbilisi-Ceyhan oil pipeline. The move cleared the way for creation of two companies to finance and build the 1,730-kilometer link from the Caspian to the Mediterranean Sea.

At a ceremony in London, officials from Azerbaijan, Georgia, and Turkey witnessed the founding of the BTC Pipeline Company, which will construct and own the $2.9 billion line. The biggest interest belongs to Britain's BP oil company with 34.7 percent, followed by the 25 percent share of the Azerbaijani state-owned oil firm SOCAR.

The moves leave little doubt that the project to pump 1 million barrels of oil per day will now take place as planned, nearly eight years after Western oil companies signed the first contract to develop Azerbaijan's Caspian oil fields.

The event may be one of many to mark the launch of the controversial pipeline, which has been one of Azerbaijan President Heidar Aliev's top strategic goals. A statement still suggested possible hitches, saying that the BTC board needed to be "assured of the completion of the few remaining preconstruction activities," the AFP news agency reported.

But the first major contracts have already been awarded for laying pipe through Azerbaijan and Georgia, a likely sign that there will be no turning back. Actual construction is expected in the first quarter of next year with completion in late 2004.

In a brief statement, the U.S. State Department welcomed the formation of the company, calling it "a major step forward for the pipeline project, which will carry oil from the Caspian Sea region to the Mediterranean for export onto world markets."

So far, the press seems to have paid little heed to an event that attracted enormous of amounts of coverage during its years in the making. Every political aspect of the pipeline has been explored in exhaustive detail.

Many stories focused on opposition from Russia and Iran and their attempts to compete with Caspian routes on their territories and under their control. Aliyev pursued the line to Turkey as a pillar of independence. The theme of the "great game" echoed through scores of headlines.

Fatigue may account for some of the apparent indifference to a breakthrough that may now deserve more attention than it has received. But there are also signs that some of the controversy over the pipeline has faded away.

Part of the reason is that companies may now be providing a greater push for the pipeline than governments. Although the administration of U.S. President George W. Bush has repeatedly voiced support for BTC, the preoccupation appears to be less than in former President Bill Clinton's terms.

Oil companies were initially cool to the BTC plan, despite U.S. government urging. In one White House meeting during the Clinton administration, the companies pointedly refused to join in the project.

That situation turned around when BP Amoco announced it would not only join but would take the lead. In October 1999, a company spokesman said, "We have come to the conclusion that the Baku-Ceyhan pipeline is a strategic transportation route that should be built."

Since then, the company has been relentless in seeking partners and resources to move the plan ahead. BP's only explanation for the switch is that it decided to support Baku's objectives because of its heavy investment in Azerbaijan.

Opposition from Russia and Iran has not ended, but it has eased in tone, in part because both countries see an interest in broader ties with Azerbaijan.

In January 2001, President Vladimir Putin took the chill off Russian-Azerbaijani relations with a visit to Baku, leading to bilateral agreement on a Caspian division formula. After a dangerous incident in July 2001 involving an Iranian gunboat and two Azerbaijani vessels hired by BP, Tehran has also taken pains to improve relations and reach security understandings with Baku.

The pipeline is no longer at the top of the agenda in relations between Azerbaijan and its neighbors, reducing pressure over the project, now that it is finally going ahead. There seems to have been little if any reaction to last week's announcements in either the Russian or Iranian press.

The construction of the pipeline still seems likely to be one of the major developments in the Caspian region since the Soviet breakup. But without the spark of controversy, the Western press has also apparently concluded that there is less to report.