Baku Ceyhan Pipeline is Bad Choice

WASHINGTON (Turkish Daily News)–Petroleum Finance Company–a private think tank in Washington focusing exclusively on petroleum issues–has just published a comprehensive report on the Baku-Ceyhan pipeline which will not bring joy to the heart of any Turkish decision-maker.

The report entitled "The Baku-Ceyhan Pipeline: Constraints to a US-backed Central Asian/Caucasian Exit Route," researched and written by Lowell Bezanis–examines the feasibility of the pipeline from the point of view of all regional countries that are involved in the matter–i.e. Turkey–Azerbaijan–Armenia–Georgia–Kazakhstan–Turkmen’stan–Iran–and Russia.

The 22-page report basically concluded that the Baku-Ceyhan pipeline–despite the enthusiastic support it receives from Turkey and the United States–is not an attractive and obvious choice for the other regional countries who happen to have their own separate ideas on how to transport the oil and gas resources of the Caspian to the world market.

‘Differing Priorities’ "Overall–the differing priorities of the key Caspian countries make it unlikely that they will join forces to make Baku-Ceyhan commercially viable," the PFC report concluded.

Correctly identifying the Baku-Ceyhan pipeline as the "linchpin" of Washington’s "East-West energy and transport corridor," the report–however–asserted that "the approach is an exercise in geopolitical gerrymandering and aims to funnel hydrocarbon and trade flows away from Russia."

Previously–such US private oil companies as AMOCO and Mobil also expressed their opposition to Baku-Ceyhan on the grounds of the commercial unfeasibility of the 1,700 km-long–$2.5 billion project.

Petroleum Finance Company has been known to have defended a route through Iran on various occasions in the past as the most commercially feasible outlet for the Caspian energy resources. However–the official US "dual containment" policy towards Iran and Iraq has so far made it impossible to consider an Iranian alternative as a realistic option.

Equivocal support

The report claims that even the US support for Baku-Ceyhan since 1994 has been equivocal for two reasons:

1. "Washington … effectively left Turkey itself to build consensus for the project among Caspian countries and oil companies involved there."

2. "Furthermore–the Clinton administration’s backing for Baku-Ceyhan has always been given with the caveat the project proves itself to be commercially viable."

Washington’s impotence

Report said Washington "can do little more than attempt to lead and influence an extraordinarily complex decision-making process" dominated by "regional leaders and … corporate boardrooms."

That’s why "Baku-Ceyhan is less a key component of a sophisticated American policy and more a mere option–like others–to be weighed in the plans of regional politics and profitability."

Among other shortcomings of the project–the report also argued that Baku-Ceyhan will never have the necessary additional volume of oil to make it profitable. "Though AIOC needs are catalyzing the debate–its peak production of an estimated 700,000 bpd in 2008 is unlikely–from a commercial standpoint–to warrant a major export pipeline to Ceyhan."

The revived CPC (Caspian Pipeline Consortium) pipeline from Kazakh fields around Tengiz to the Russian port of Novorossiysk will also drain additional volumes away from Baku-Ceyhan–the report noted.

‘Implicitly pan-Turkist’ The report devoted considerable space to how the Baku-Ceyhan pipeline plan "originates with the initial–hyperactive and implicitly pan-Turkist phase of Turkey’s involvement with the CIS," according to the author of report–Bezanis. Then he goes on to illustrate how Turkey woke up from its "multiple illusions–namely that Russia was ‘defeated’ and the West supported her."

"The pipeline project became the metaphor for a great geopolitical realignment which the Turks prematurely declared themselves to be winning," the report said.

The rest of the story is one of Turks "sobering up" and exercising "belated damage control" vis–vis Russia – which was "largely rhetorical," according to Bezanis.

Infighting of Turkish bureaucrats

The report also described an aspect of the Baku-Ceyhan project that is not well-known to some American researchers: the infighting between former Prime Minister Tansu Ciller’s "energy czar" Emre Gonensay and the then-head of the Turkish state pipeline company (BOTAS)–Hayrettin Uzun.

Uzun insisted that Gonensay’s support for the Baku-Supsa line (or the "Western route") was a mistake since that line has the potential to develop into an exclusive outlet of its own and not a mere first leg on the Baku-Ceyhan route.

"The infighting did not end there," Bezanis noted. "After a new coalition government came to power in early 1996–Gonensay briefly became foreign minister. A new pipeline coordinator was appointed and then sacked. The portfolio was then handed over to the Ministry of Energy and Natural Resources in April of 1996. At the same time–top personnel in key bodies like TPAO and BOTAS were also changed… The entire affair raised serious doubts in Turkey whether or not Baku-Ceyhan would come to fruition."

Perception changed

"This perception changed radically only last fall. In September of 1997 a new pipeline coordinator–Altan Ozer–was appointed … All indications suggest Turkey is prepared–to an unprecedented extent–to have substantive discussions with all relevant parties," the report said.

Turkish Undersecretary of Foreign Affairs Korkmaz Haktanir–in his recent official visit to Washington–said it was time to talk seriously about the financing of Baku-Ceyhan with all parties concerned.

Military’s role

Turkey’s ability to successfully conclude the complex negotiations with multiple parties is "contingent upon Turkey achieving some modicum of domestic political continuity … [And in that effort] the unstated but key role of the Turkish military will likely shape the outcome," Bezanis noted.

"Turkey’s efforts to raise environmental problems … rings hollow… The Straits issue–is in effect blackmail designed to bring Turkey taxes–transit earnings–investment–and political influence," Bezanis claimed.

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