TURKPULSE No:11 ............................DECEMBER 10^th,  1999

During the OSCE summit in Istanbul on November 18^th and 19^th, four more agreements were signed for the Baku-Ceyhan oil pipeline and the Turkmen gas, in addition to the scores of agreements or official declarations that have been issued on these projects during the last seven years. It is claimed that the framework to give effect to these projects is now complete with President Clinton’s co-signature as an observer in addition to the signatures of the heads of states or ministers of the countries concerned. These countries are Turkey, Azerbaijan, Georgia, Kazakistan and Turkmenistan, the last two being for additional oil to the pipeline or the natural gas from under the Caspian.

Only a year ago, on October 29^th, 1998, the same heads of states had signed similar agreements for the Baku-Ceylan pipeline and the American Secretary of Energy, Bill Richardson, was the co-signatory at that time. Energy Minister Cumhur Ersumer admits that a number of other agreements and contracts will have to be concluded on these projects before their completion.

Are western multinationals dragging their feet?

Under the four latest Istanbul agreements, the construction of the Baku-Ceyhan oil pipeline is scheduled to start on January 1^st, 2001 and start operating in April 2004. The Trans-Caspian natural gas pipeline’s construction schedule is even more ambitious. The American consortium headed by PSG pledges to start construction at the end of 2001 and begin operating within a year. Ersumer says these giant multinationals have no financial problems and can easily fulfil their promise. Many observers and insiders agree to disagree, as they believe that these objectives are too optimistic. They say that the construction cannot possibly start before 2005 for either of them, let alone finish by 2002 or 2004.

The Trans-Caspian pipeline for the Turkmen gas is much more difficult and complicated than the Baku-Ceyhan project. Even for the easier second project, the main reason for this suspicion is the serious fact that there is not enough oil in Azerbaijan. The most that Azerbaijan can supply through the pipeline is 27.5 million ton/year and 50 million ton/year oil is needed to make the project viable, experts stress. However, one of these agreements signed in Istanbul during the OSCE summit is about Kazakistan’s pledge for up to 20 million ton/year oil through the Baku-Ceyhan pipeline and it may eventually allay this setback.

The 1730-km pipeline will pass through Azerbaijan (468 km), Georgia (225 km) and Turkey (1037 km). The longest stretch in Turkey will cost $1.3 billion to construct and with $100 million expropriations it amounts to $1.4 billion. Turkey has undertaken to build this stretch by itself with its own resources. The pipeline is scheduled to be finished by April 2000 and will be initially used for the gas from Iran. The Azerbaijan and Georgian stretches of the Baku-Ceyhan pipeline are, however, far from being completed. The Anglo-American dominated AIOC (Azerbaijan International Oil Corporation) is dragging its feet about this project, much to Ankara’s disenchantment. The situation about the Trans-Caspian gas pipeline is even gloomier, even though the Turkish government and media drew a rosy picture about both of these pipeline projects after the four agreements in Istanbul.

Blue Stream makes headlong progress

While this "too-many-agreements-not-enough-action" situation looms over these two pipelines, the natural gas projects from the Russian Federation are advancing in the exact opposite direction, with all action and little talk. The 6 billion m³/year natural gas pipeline from Russia to Turkey via Romania and Bulgaria is being enlarged to 14 billion m³/year and the 16 billion m³/year Blue Stream project has entered the final stage of construction of the pipeline from under the Black Sea. Gasprom, the Russian oil and gas giant, has signed the necessary agreements with the Italian, German and Japanese companies for this ambitious technological venture and seems determined to deliver the natural gas to Samsun on FOB basis by 2001. Turkey is also going on with the Turkish part of the pipeline between Ankara and Samsun even though the previous Government’s Energy Minister, Ziya Aktas, (allegedly an American citizen) had decided that the construction would not start before the Russians brought the gas to Samsun. It was tantamount to undermining the project, as no one would make such a big investment under these conditions.

The additional protocol for tax exemption to the imported gas was signed in Moscow on November 27^th as the Russians had been urging. The Turkish Government had already given $52 million advance payment to two Turkish companies, Gasprom’s subcontractors, for the Samsun-Ankara stretch. Thus everything is ready for the Russians to give a spur to the Blue Stream project which they are very enthusiastic about.

While Russia is taking big strides for the completion of the Blue Stream project as soon as possible, it is also preoccupied with preventing the Turkic States from making bilateral or multilateral oil or gas arrangements with the United States. Straight after the completion of the formalities with Turkey about the Blue Stream, the Russian Foreign Minister headed a delegation to Tehran and made arrangements about the Caspian oil and gas. The two powerful nations of the region announced after these talks that it was not possible to ship the Turkmen gas to Turkey from under the Caspian before the status of the Caspian was finally settled.

This suits Azerbaijan too because it has a dispute with Turkmenistan about partitioning the Caspian oil and gas fields. Even though this dispute was temporarily solved thanks to Turkey’s strenuous efforts with one of the four agreements signed in Istanbul, it is far from reaching the point of action. Now that Azerbaijan has found very rich natural gas deposits, it is keen on not loosing the Turkish gas market to Turkmenistan, as Turkey is the only big energy importer of the region. One of the four agreements in Istanbul concerned Turkish assurances to Azerbaijan that its gas would be purchased by Turkey when it started developing and operating these gas fields which will take at least five years.

Turkey’s far-sighted oil and gas policy

In the current "Great Game" over the Caspian and Central Asian energy resources between the Americans and the Russians, Turkey has so far followed a very wise policy of trying to compromise the interests of the two giant countries without blindly siding with either of them.

That is why Ankara pledged to both Moscow and Washington that it would build the pipelines within its own territory with its own financing and technology and that the other side should undertake the responsibility for delivering the gas to the Turkish frontier on FOB basis.

Russia is capable of doing this with the Blue Stream project and by all indications the project will be operable in 2001 now that all the necessary agreements have been signed and there is a stable government in Ankara. But the Baku-Ceyhan pipeline and especially the Trans-Caspian gas pipeline are far from reaching that point. President Demirel has rightly said that it was not possible to do anything in this region despite Russia. Judging by Ambassador Morningstar’s public statements, Washington is also of the same opinion, but prefers to have Turkey on its side by turning its back on Russia. Yet with the experience of the cold war period, Ankara will never make this mistake again. So there remains for Turkey to try to bridge the gap and differences between the two superpowers to the advantage of its own energy plans and projections. Failing this Ankara will go along with the other side about these agreed upon energy plans.

As things stand at the moment, the pendulum is swinging in favour of the Blue Stream and President Turkmenbasi Niyazov’s arrangements with the Americans are meeting with enormous difficulties. This is not the case with only the Trans-Caspian gas pipeline, but also with the Taleban-centred religious fundamentalism in Central Asia. Turkmenistan is not co-operating with the other Central Asian countries in fighting Taleban fundamentalism, but what has happened to Nawaz Sherif in Pakistan should be a lesson for all those who play such dangerous games.  uras@ada.net.tr,  December 10^th, 1999

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