US Sees Possible Azerbaijan Armenia Deal

WASHINGTON (Reuters)–The United States believes a first-phase agreement in the Karabakh conflict–which according to US officials– is impeding Caspian Sea energy deals may be possible this year–a senior official said Thursday.

"We think there is a chance for a first-phase agreement as early as the end of this year," Undersecretary of State Stuart Eizenstat told a Senate Foreign Relations Committee hearing.

He also said the United States–which is focusing more attention on the Caspian Sea region and its potential–will soon open energy talks with Azerbaijan and Turkmen’stan.

"We are expanding and institutionalizing our contacts. A high-level interagency delegation will initiate energy dialogues with Azerbaijan and Turkmen’stan this fall."

Eizenstat outlined US policy toward the region–which in recent months has attracted increased high-level attention within the administration for strategic and economic reasons.

But Sen. Sam Brownback told the committee "I don’t think we’re doing enough" to take advantage of what he called a narrow window of opportunity to influence events there.

The Kansas Republican plans legislation that would set a policy for the region–provide aid and seeks to ensure Iran and Russia do not play too strong a role.

In his testimony–Eizenstat noted the Caspian’s potential as one of the world’s most important new energy producing regions and said its "rapid development … is critical to the independence–prosperity–democracy and stability of all the countries of Central Asia and the Caucuses."

A major US initiative has been to encourage countries in the region to end conflicts–the most important of which has been the Nagorno-Karabakh conflict.

In this quest–"we believe we are making real progress and our task now is to organize serious negotiations on the basis of our proposal. We’re working very hard on it," he said.

The United States is working with France and Russia to end the conflict in Armenian Karabakh.

The three major powers last May for the first time put forward a coordinated proposal. Under it–Karabakh would remain under Azerbaijan–with a so-called high level autonomy–while Armenian regions would be returned to the Azeris.

Levon Ter-Petrosyan shocked observers at home and abroad last month by saying neither independence nor union with Armenia would be realistic. This reversed his long-time insistence that Karabakh Armenia’s had a right to full self-determination and fueled hopes of a deal.

Nevertheless–despite Eizenstat’s decidedly upbeat assessment–some US officials remain doubtful that the Karabakh Armenia’s will go along or that Ter-Petrosyan has either the clout or the will to force them to do so.

Eizenstat urged establishment of a Caspian legal regime to resolve concerns about property rights and sovereignty and said it would promote large-scale regional investment.

He also said the US government had to do much more to help its companies compete for energy deals in the region – as many foreign governmen’s already do – and urged Congress to end a ban on aid to Azerbaijan or at least permit some programs–like technical assistance and democracy-building.

Eizenstat also warned that US sanctions might be imposed on a deal permitting Turkey to purchase gas from Turkmen’stan via a pipeline across Iran if it is found to benefit Iran.

"Should we find evidence of investment activity which could enhance Iran’s ability to develop its own petroleum resources–(we) will take appropriate action under ILSA," he said referring to the 1996 Iran-Libya Sanctions Act.

The act mandates sanctions against companies investing more than $20 million a year in Iran’s energy sector.

Eizenstat noted that in July–the administration informed Congress that Turkey’s gas pipeline plans "do not appear to constitute sanctionable activity under ILSA."

But he said this announcement "has been widely misinterpreted to mean that the US has approved a pipeline across Iran. This is definitely not the case."

While Washington views Turkey’s decision to purchase gas from Turkmen’stan rather than Iran as positive "we do not support any pipeline through Iran," he said.

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