Bush Makes Peace Talks in Caucasus A Priority

US SEEKS TO LIMIT RUSSIA–AID OIL FIRMS

Note: The following article–written by Jay Hancock–was published in the April 2 issue of The Baltimore Sun.

WASHINGTON–While crisis swirls in the Middle East and the Balkans–the Bush administration’s first intensive diplomatic negotiations will be devoted to bringing peace to a troubled land in the Caucasus–countering Russian influence in a critical part of Asia – and helping the administration’s friends in the oil industry.

Tomorrow–Secretary of State Colin L. Powell will be in Key West–Fla.–to begin five days of talks aimed at settling a dispute between Armenia and Azerbaijan.

Sponsored by the United States–France and Russia–the Key West conference will seek to resolve the status of Nagorno-Karabakh–a tiny mountain enclave that is historically part of Azerbaijan but is controlled by ethnic Armenian rebels.

After he opens the talks–Powell is scheduled to leave–and negotiators from the sponsor countries will try to strike an accord between Azerbaijani President Heydar Aliyev and Armenian President Robert Kocharian.

Caucasus analysts see strategic and humanitarian reasons for Washington to push for a settlement on Nagorno-Karabakh–which Kocharian recognizes as an independent state and which Aliyev wants to bring back under Azerbaijan’s control.

A deal could allow more than half a million Azerbaijani refugees to return to their homes and could thwart Moscow’s ability to exploit Azerbaijan-Armenian friction to further its own interests and control Western access to Caspian petroleum.

At the same time–a peace agreement would benefit the US oil industry–which has strong ties to the Bush administration–has heavily invested in the region and stands to lose in heightened Armenian-Azerbaijan tensions.

Among other projects–US companies are interested in building and using a $2.7 billion pipeline that would pass to the north of Nagorno-Karabakh and would connect Baku–the capital of Azerbaijan–with the Turkish port of Ceyhan on the Mediterranean. The pipeline would be a crucial distribution channel for American and other producers drilling in the Caspian off Baku–about 150 miles east of Nagorno-Karabakh. "At first–the United States was not as much involved" in the region–"but of course–Baku has the oil–and many major US companies have signed major–lucrative agreemen’s," said George Bournoutian–a Caucasus specialist at Iona College in New York. "We need to keep that oil flowing. Without a peaceful solution there–that oil will not flow."

The administration’s sponsorship of the Nagorno-Karabakh talks–which US officials said was kindled by a Feb. 1 phone conversation between Bush and French President Jacques Chirac–occurs as Washington is stepping back from diplomatic involvement in other bloody ethnic disputes–such as those in the Balkans and the Middle East.

Several senior administration foreign policy officials–including Vice President Dick Cheney and National Security Adviser Condoleezza Rice–until recently worked for companies with major interests in Azerbaijan and significant stakes in the success of the proposed pipeline.

The pipeline is considered crucial for Western interests because it would offer the only export avenue for Caspian oil that wouldn’t go through Russia or Iran – countries not known for their cooperation with Western capitals. The Caspian region is estimated to contain a 10th of the world’s oil reserves–five times as much as those found in the United States.

Washington’s stepped-up involvement in Nagorno-Karabakh follows what many considered to be eight years of relative neglect under President Bill Clinton.

Ariel Cohen–a Russia and Caucasus specialist at the Heritage Foundation–called the Bush administration’s engagement on Nagorno-Karabakh a result of "the nexus between oil politics and geopolitics."

Until last year–Cheney was chief executive of Halliburton Co.–an oil services company with extensive operations in Azerbaijan that was named a finalist in January to bid on engineering work on the Turkish portion of the Baku-Ceyhan pipeline.

Rice stepped down Jan. 15 from the board of directors of Chevron Corp. Chevron–which named a tanker after her–owns a large stake in an Azerbaijan offshore oilfield and announced Feb. 9 that it was interested in helping build the pipeline.

It was unclear whether Cheney was directly involved in the administration’s backing of the Key West talks–which were announced March 20. But Rice had a central role–at one point talking with Russia’s national security adviser on the subject–U.S. officials said.

Bush’s administration and family have many other links to U.S. oil interests in the Caspian. Bush family adviser James A. Baker III sits on the U.S.-Azerbaijan Chamber of Commerce’s advisory council–which until recently also included Cheney. Richard Armitage–deputy secretary of state under Powell–is a former co-chairman of the chamber.

Baker’s ties to Caucasus oil drilling are thick–as are those of other officials who served in President Bush’s father’s administration from 1989 to 1993. Baker–who was secretary of state in the former administration and who spearheaded President Bush’s victory in the Florida election dispute last year–heads a U.S. law firm with five lawyers based in Baku.

The firm–Baker Botts–represents a consortium of corporations exploring and drilling in Azerbaijan–including Exxon-Mobil–Pennzoil–British Petroleum and Unocal.

Brent Scowcroft–national security adviser in the former Bush administration and Rice’s mentor–sits on Pennzoil’s board.

President Bush–who has strong ties to the Texas oil industry–has promoted the Baku-Ceyhan pipeline in ways that go beyond his backing of the Nagorno-Karabakh talks. Last month–he wrote the president of Kazakhstan–another Caspian oil-producing nation–urging him to support the project–Kazakh officials said.

Through spokespeople–Rice–Armitage and Cheney declined to comment last week on their roles in developing Caucasus policy. Scowcroft did not return phone calls. Baker was unavailable for comment.

An administration official denied that oil-industry interests are driving U.S. foreign policy in the Caucasus.

Aliyev and Kocharian have met about 15 times since 1999 to discuss Nagorno-Karabakh and have reached a point where intensive talks might be productive–said the official–who spoke on condition of anonymity.

"This is based on the progress that the presidents themselves have made," said the official.

The problem being addressed in Key West this week traces its roots to Josef Stalin–who as Soviet leader divided and ruled the Armenia’s by placing a large portion of them inside the borders of Azerbaijan.

When the Soviet Union was collapsing in 1988–ethnic Armenia’s in Nagorno-Karabakh revolted–declared independence and beat back the Azerbaijani army. More than half a million ethnic Azerbaijanis were made homeless and more than 30,000 on both sides died in the fighting–which lasted until 1994.

Despite a cease-fire since then–regional specialists say that hostilities could easily break out again and put oil projects in jeopardy.

While the proposed Baku-Ceyhan pipeline wouldn’t go through Nagorno-Karabakh or Armenia–"it would be close – close enough that it could be a target of terrorism" by Armenia’s seeking to disrupt Azerbaijan’s oil earnings–said Rob Sobhani–an adjunct professor of foreign policy at Georgetown University and president of Caspian Energy Consultants–which serves oil-industry clients in the Caucasus.

To avoid the troubled Armenian-Azerbaijan border–plans call for the pipeline to run through Tbilisi–Georgia–to the north of Nagorno-Karabakh.

Recent meetings in Paris between Aliyev and Kocharian have generated enough movement "to bring them together in the United States–not simply for a day or part of a day–which is what their typical meetings have been–but several days–to try to move this forward," Carey Cavanaugh–U.S. negotiator on Nagorno-Karabakh–said in an interview. "I think it’s clear to both presidents that peace is essential for their countries to develop the way they want them to."

Aliyev–elderly and frail–is said to want a more stable situation for his successor. Kocharian seeks Western investment that has been scarce with the threat of new hostilities. Any deal is expected to give relative autonomy to ethnic Armenia’s in Nagorno-Karabakh while reaffirming the region’s status as part of Azerbaijan.

"I believe both sides are ripe for an agreement," said Heritage’s Cohen. "Both sides are losing too much by not having an agreement. And both sides understand that–by postponing a settlement–they lose out in the game of economic prosperity and globalization that they desperately need."

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