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Caspian: Region Drawn Into U.S.-Turkey Debate

A U.S. official has said that there has been no change in support for Caspian pipelines to Turkey, despite diplomatic differences over the war in Iraq. But experts are split on whether the imminent projects will be affected by the current political problems and the return of Iraq to the oil market after the war.

Boston, 25 March 2003 (RFE/RL) -- Analysts are divided on whether the Iraq war and U.S. differences with Turkey will affect the big Caspian pipeline projects that seem about to get under way.

The Caucasus countries of Azerbaijan and Georgia have waited years for the launch of U.S.-backed oil- and gas-pipeline projects with Turkish outlets, only to face the risk of a falling-out between Washington and Ankara on the eve of construction this spring.

Both the Baku-Tbilisi-Ceyhan oil pipeline (BTC) and the companion Baku-Tbilisi-Erzurum gas project (BTE) have benefited in their early stages from strong U.S. political support for Turkey and shared strategic goals.

Although the U.S. government has always insisted that the pipelines be commercially viable, it has also pushed hard for a Caucasus energy corridor that would join the Caspian region to Turkey in support of a key U.S. ally.

But strains in the alliance have emerged over the Iraq war, just as pipes are scheduled to be laid in the ground.

On 24 March, "The New York Times" painted a dark picture of U.S.-Turkish relations following Ankara's failure to approve access for allied ground forces to Iraq and its delay on authorizing the use of airspace.

Turkey's former ambassador to the United Nations, Cem Duna, cited "very important damage" to the long-term U.S.-Turkish strategic partnership. He added, "The trust that was built over this period is no longer here."

In a separate opinion piece, "The New York Times" columnist William Safire charged that "the new, Islamic-influenced government of Recep Tayyip Erdogan transformed that formerly staunch U.S. ally into Saddam's best friend." Safire also accused Ankara of hiding designs on Iraqi oil behind its concern over Kurdish activities in northern Iraq, writing, "That's strictly Erdogan's cover story for an oil grab, undermining the coalition's plans for an Iraq whole and free."

Such remarks may be a measure of the bitterness in some Washington quarters. But in an interview with RFE/RL, the U.S. State Department's Caspian adviser, Steven Mann, was asked whether he saw any change in U.S. support for the pipelines. Mann replied, "None whatsoever."

Mann said, "The pipeline projects have a certain fundamental logic to them that I don't believe will be affected by any events outside the Caspian." He conceded that the twin pipelines had needed "a certain pump priming [efforts to get things started]" in the early stages, adding that "we gave it for strategic reasons." But he argued that the projects have long since been adopted by international oil companies for commercial reasons and could stand on their own.

But Mann also said he has been telling the participants that they need, more than ever, to keep the projects competitive because the return of Iraqi oil to the market after the war could affect the race for investment funds.

Trench work has already started on the $2.95 billion BTC oil project, which is led by Britain's BP oil company. The first oil is expected to flow through the 1,760-kilometer route from the Caspian to the Mediterranean in 2005.

Laurent Ruseckas, an analyst for U.S.-based Cambridge Energy Research Associates in Paris, largely agrees with Mann's conclusion. Ruseckas said, "Obviously, U.S.-Turkish relations have been damaged and in a variety of ways that is going to lead to less U.S. support for Turkish objectives in a number of areas."

Ruseckas said: "If this had happened in 1999, it might have had an impact on BTC. But now the sponsor group led by BP -- including Azerbaijan -- are the main drivers of the project, and the active support of the U.S. government is not as significant."

He said the projects could be affected if U.S. export credit agencies were instructed to withhold financing, but he added that "nothing like that is within the realm of reason." Mann said that final financing decisions are likely in the fourth quarter of this year.

But Bulent Aliriza, a senior associate and director of the Turkey Project at the Center for Strategic and International Studies in Washington, raised more doubts about the outcome. In an interview from Turkey, Aliriza argued that if the political drive for BTC wanes, it will put more stress on its practicality.

Aliriza said the BTC "has to prove that it's commercially viable," adding, "I'm not sure that it is."

Aliriza said the return of Iraqi oil to the market after the war will be an important factor for the future of the Caspian pipelines. Redevelopment of Iraqi resources will not only compete for investment, but the oil may be cheaper than Caspian petroleum piped across the Caucasus.

Aliriza said, "If there are changes to the global energy picture because of the emergence of Iraq, where there's plentiful oil and much cheaper oil at the wellhead at a time when the U.S.-Turkish strategic not what it was, then I think the onus is on those who are pushing this project to prove more than ever that it is, indeed, commercial."

Doubts are even deeper about Azerbaijan's $3.2 billion Shah Deniz gas project, which includes the BTE line, Aliriza said, adding that Turkey has no need for the additional gas that the pipeline would bring.