Turkey Threatens to Increase Straits Fee Five Fold

ISTANBUL (Reuters)–Turkey said on Friday it may raise transit fees five-fold for use of its straits by tankers if Western companies choose them as the outlet of main Caspian oil instead of a pipeline proposed to by-pass the straits.

"Those who want to make the straits an oil way should know that we can raise the transit fee five-fold any time," State Minister Burhan Kara–in charge of maritime affairs–told a news conference in Istanbul.

"Then they will see what will happen to their dreams of cheap oil," he said before announcing a series of new measures to ensure safer transit navigation through Istanbul’s Bosphorus and Canakkale’s Dardanelles straits.

"The straits are not international waters–neither are they an oil way and they will never be," Kara said. "Let those who want to sell Caspian oil to world look for other outlets."

He said Turkey has been imposing only 20 percent of the fee set by the 1936 Montreaux Convention–which governs the use of the straits by cargo of other countries.

Kara said the straits did not have the technology and physical capacity to handle more oil passage–which reached 60 million tons of crude carried by about 5,000 tankers in 1997.

Turkey says an increased oil traffic through the straits will raise environmental risk for some 10 million Istanbul and Canakkale people living around the straits.

Kara said the new measures–which took immediate effect–were aimed at preventing legal conflicts regarding the straits and expressing clearly Turkey’s sovereignty rights.

The measures included a compulsory passage notification of Turkish authorities by cargo and military vessels up to 72 hours ahead of the passage–depending on cargo type and size of vessel. Turkey can prolong the period–if need be.

Analysts say compulsory passage notification will delay cargo transportation and Kara said non-oil transit cargo of the Black Sea countries will be adversely affected by the new rule if an accident occurred in the straits.

"If an accident occurs in the straits–that will cut off the wind pipe of the Black Sea countries–whose foreign trade 70-percent depend on the waterways," he said.

All vessels that are not on non-stop passages must have a Turkish cruise pilot for their navigation through the straits.

Vessels should report to Turkish authorities during their passage–with larger vessels having to report more frequently than others. Criteria regarding the visibility rules will be regulated anew.

"The new legislation on the straits will right away be sent to all local and international maritime institutions," Kara said–adding that the measures were in full agreement with the Montreaux convention.

Meanwhile disagreemen’s between Azerbaijan and an $8 billion British Petroleum led oil consortium are being blamed for the latest delay in deciding on a pipeline route for Caspian crude–diplomats and industry officials here say.

Charles Pitman–chairman of Amoco Eurasia–one of 12 consortium members–said on Thursday that a recommendation on the route to Azeri President Haydar Aliyev by AIOC and Azeri state oil company SOCAR was unlikely before December.

AIOC officials have said in the past that they were shooting for a recommendation by the end of October. Increasingly they seem reluctant to name any date at all.

"I really can’t tell you when there will be a recommendation on the pipeline. We have never put an exact date on this," said AIOC spokeswoman Pamela Mounter.

"The negotiations are just very complex," she said. The pipeline tug of war pits AIOC members–who must ultimately pay for most of the pipeline–against the governmen’s of the United States–Turkey and Azerbaijan.

These three want a giant 1,070 mile pipeline from Baku–through Georgia and on to Turkey’s Mediterranean port at Ceyhan–mostly for geopolitical and strategic reasons.

But the route would cost an estimated $4 billion and AIOC members–worried by falling crude prices and the true volume of Caspian reserves–are delicately lobbying Aliyev to settle for a shorter and cheaper line to Georgia’s Black Sea outlet at Supsa.

This option would allow for a spur to Ceyhan to be added later–when commercially viable.

"In the end it comes down to money," said a diplomat in Baku. "The AIOC is in a very delicate situation. It does not want to offend the President. So it is trying to show that the Ceyhan option would cost too much at present," he said.

Continuing low crude prices mean Azerbaijan stands to earn significantly less from the "contract of the century," as it was labeled when signed in 1994–than originally thought.

"Given low oil prices–the Azeri income from the contract is less than had once been projected. Baku-Ceyhan’s cost will eat up more of the profits," said the diplomat.

Western oil company officials in Baku say the AIOC does not see why it should have to pay for the higher cost associated with Baku-Ceyhan–which it views as basically political.

The US has tried to save the project by offering some financial help–though the amount is likely to be modest in comparison with the total cost.

The continuing insistence on Baku-Ceyhan by the US seems to stem from a desire to strengthen close NATO ally Ankara–suffering from the loss of Iraqi crude exports pumped through its territory–as well as its pro-Western regional friends–Azerbaijan and Georgia.

Azerbaijan would gain by closer links to its ethnic brethren in Turkey–thereby lessening dependence on Russia–and neighbor Iran–with which it has strained ties–to the south.

Azerbaijan would also gain from exports of Kazakh and other Caspian oil through a Baku-Ceyhan pipeline.

Industry officials say AIOC is in little hurry to start building a new pipeline at all. It has years before its peak production of an estimated 700,000-800,000 barrels per day will be reached in 2007-2010.

Two smaller pipelines–one to Supsa under renovation and to be completed in 1999–and one already in operation to Russia’s port of Novorossisk–are adequate to handle near-term output.

Others say the slow pace also stems from the possibility that improved ties between Iran and the West will later make shipmen’s of oil through it a cheaper alternative.

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