Baku Ceyhan Prospects Bleak Reports New York Times

WASHINGTON–BAKU (The New York Times–Reuters)–In an article in The Sunday New York Times–Stephen Kinzer reported that "a two-year campaign by the Clinton administration to convince major oil companies that they should quickly build a multi-billion-dollar pipeline in the Caucasus–a campaign that has become a centerpiece of American foreign policy–appears to be on the brink of failure."

"Administration officials–congressional aides and oil executives said in interviews last week that the companies will probably decide that the American-backed pipeline is too expensive to build now. The companies are expected to announce that they will rely on a much shorter pipeline that is already being built from Azerbaijan to the port of Supsa–on Georgia’s Black Sea coast–or an enlarged pipeline along the same route," reported the New York Times

"Officials in Washington–however–expect that the American-backed route will not be chosen. They are already debating how serious a setback it is for the administration and the security interests of the United States," added the Times.

An international consortium of Western oil companies and seven other nations are scheduled to make a decision on the transport of Caspian oil to the West–with a pipeline connecting the Azeri capital of Baku with the Turkish port city of Ceyhan at the centerpiece. The pipeline would go through Georgia and into Turkey

"The Clinton administration has been exerting every form of persuasion at its disposal to persuade the oil companies to choose a route that would run from Baku–the capital of oil-rich Azerbaijan–through Turkey to its Mediterranean port of Ceyhan. But it is evidently losing the battle," reported the New York Times.

"The oil companies are expected to couch their announcement in terms that will be as reassuring as possible to all parties and to include a pledge to build the Baku-Ceyhan pipeline someday. But that is not enough to console some in Washington who have worked hard to secure an immediate commitment," reported the newspaper.

"The administration favored the Baku-Ceyhan route because it would pass through only relatively friendly countries–Azerbaijan–Georgia and Turkey–and would bind them closer to the West; because it would pull Azerbaijan and Georgia out of the Russian shadow; and because it would not pass through either Russia or Iran–both of which have offered routes of their own," said the Times.

"Unfortunately for the administration–however–the Baku-Ceyhan route is also the longest and most expensive to build of all proposed routes.

"Last year the oil companies discreetly asked the Clinton administration if it would be willing to pay part of the cost of building its favored Baku-Ceyhan pipeline. They were told that any such payment would be viewed as a government handout to the oil industry–and was therefore politically impossible.

"Unable to subsidize the Baku-Ceyhan line themselves–US officials urged Turkey–through which most of the line would run–to offer the companies a generous package of incentives and tax breaks. They said this week that Turkey never produced such a package–and complained that the instability of Turkey’s government has made it a difficult partner," stressed the New York Times report.

Meanwhile in Baku–president Haydar Aliyev Azeri on Tuesday brushed aside suggestions that a proposal to build an oil pipeline from the capital Baku to Turkey’s port of Ceyhan was in trouble and might not get off the ground–reported the Reuters news agency.

This and other New York Times articles and one Turkish newspaper have said the multi-billion dollar proposal–backed by Azerbaijan and the United States government as much for geopolitical reasons as for economic ones–was in peril.

"The New York Times does not at all represent the official position of the US administration–and I do not believe that the (American government) would retreat from its decision," Aliyev told a news conference.

Aliyev repeated he wanted a final decision on building Baku-Ceyhan to be taken before the end of the month.

Technically–the Azeri government has the final say on where to build the pipeline–which is to carry crude from Caspian Sea oil projects–including the $8 billion British Petroleum led Azerbaijan International Operating Company.

But it cannot pay for the estimated $2.5-4 billion project itself–and needs financing from AIOC and Western companies to help finance it.

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