Iran News ...


5/27/05

Baku-Ceyhan Pipeline is the Biggest Development In the Caspian Sea Since the Collapse of USSR, and Islamic Republic of Iran is the biggest loser in the case

By Bahman Aghai Diba, PhD. Int. Law of the Sea

 

This week a ceremony will be held in Azerbaijan to mark the actual operational phase of the Baku-Tblisi-Ceyhan pipeline. The pipeline will be the main route for export of the Caspian Sea oil to world markets. The decision to build the controversial pipeline was first made by Azerbaijan, Turkey, Kazakhstan and Georgia in 18 Nov. 1999. At that time they singed a document called "Istanbul Declaration". The United States President, Bill Clinton was then in Turkey for a formal visit and he signed the Istanbul Declaration as a witness. They agreed that Baku-Tbilisi-Ceyhan (it is in fact read as Jeyhan because the letter "C" in Turkish stand for "j") would be the main export pipeline for oil produced in the Caspian Basin.

 

 

The pipeline had something for everyone. As far as Turkey was concerned it meant:

 

1-      A great role in export of oil from the Caspian region.

2-      Transportation of the Caspian oil to the Turkish port of Ceyhan, therefore avoiding the pollution sensitive area in the other side of Bosphors and Dardanelle.

3-      Expansion of Turkey's political and economic ties with the concerned countries in the Caucasus and Central Asian countries, especially with Azerbaijan in pursuance of pan-Turkish ideas.

4-      Transit rights and a good source of financial gain.

5-      A step to set aside Iran as a regional rival. In this rivalry, besides other ideas, Turkey plays the role of secular western style government as opposed to the radical Islamic formula of Iran.  

 

 

As far as the Republic of Azerbaijan was concerned, it meant:

 

1-      A great achievement in pipeline diplomacy of the Caspian Sea.

2-      Financial gains out of export of Azeri oil to the western markets.

3-      Establishment of Azerbaijan as a reliable source of energy for the western countries, and therefore helping Azerbaijan in its struggle to get more involved in international scene as a European country, and possible step to acceptance of Azerbaijan as a full member of the EU and NATO.

4-      Possible gains out of export of other Caspian Sea states.

 

 

As far as Kazakhstan was concerned, it meant:

 

1-      A possible way for oil exports from this landlocked state.

2-      Better relations with the western countries. Less criticizes of the undemocratic system in Kazakhstan.

3-      A step towards its long declared policy of "Multiple pipelines" with its special interpretation.

 

 

Georgia was looking to:

 

1-      Transit rights for export of oil from other countries.

2-      Becoming more important for the regional peace, especially taking into consideration the role of Chechen rebels and the Russians plans for them.

 

 

As far as the USA was concerned, it meant:

 

1-      A step towards export of oil from the Caspian resources to the Western markets in order to decrease the degree of dependence on the Persian Gulf oil.

2-      A step in line with the policy of the US government for denying both Iran and Russian Federation from benefiting oil and gas pipelines of the Caspian region in order to block the expansion of their influence and also denying any financial gains for them (which gives these countries more foreign exchange to follow the policies and buy things that the US did not like them).

3-      Reduction of the degree of dependence of Caspian countries on the existing network of Russian pipelines.   

4-      Helping the countries close to the US (Azerbaijan, Turkey and Georgia).

 

 

However, the Baku-Ceyhan pipeline had still many problems. Some of them were as follows:

 

1-      The expenses of Baku-Ceyhan pipeline were very high. It was originally estimated to cost 3 to 4 billion dollars.

2-      Some sources claimed that Baku-Ceyhan pipeline was a political pipeline and it would crash eventually under the pressure from economics. Some people thought that the political barriers in relations between Iran and the USA might be removed by developments in Iran. In that case the Americans might stop opposing the Iranian route, which was the most economical way to export the Caspian oil and gas products. For the same reason, the Iranian officials in charge of Caspian affairs declared decisively after the conclusion of the Istanbul Declaration that the Baku-Ceyhan would never be built and it was going to stay on paper forever.

3-      Some experts argued that there was not enough oil in the concerned areas to justify the Baku-Ceyhan pipeline.

4-      The 1760 kilometers pipeline was too long and crossed politically volatile areas such as Georgian territory which was an unstable territory.

5-      The Baku-Ceyhan pipeline crossed too many countries in its way.

 

 

After several years of discussions and meeting in various political and technical levels the Baku-Ceyhan pipeline was built.  The pipeline is 996 millimeters in diameter, and 1760 Kilometers long.

 

What eventually led to the construction of the pipeline were:

 

1-      Position of US government in   denying Iran and the Russian Federation the benefits of passing oil and gas routes from those countries is more strategic than was thought. It seems that even in case of a fundamental change in the regime of Iran or Russia, still US prefers the main pipelines do not pass through Iran or Russia.

2-      Iran has already lost the chance for a fundamental change in its relations with the West.  The pipelines have to be built and when they are in place, no body is going to change them.

3-      The Western countries, especially the USA, following the 9/11 terrorist attacks in US, are more determined to find alternative oil resources for the oil from Arab countries that may be endangered because of special relations of the USA with Israel.

4-      Kazakhstan has concluded a strategic oil and gas treaty with the USA. According to this treaty they have agreed to try connecting Kazakhstan's oil to the Baku-Ceyhan route. This meant a great breakthrough in answering the question of enviable oil for exports through the Baku-Ceyhan pipeline and it had a considerable role in making Western oil companies interested in following the Baku-Ceyhan project. Kazakhstan was originally one of the signatories of the Istanbul Declaration. During the negotiations for Istanbul Declaration, the Kazakh president had presented a separate statement in support of Baku-Ceyhan pipeline, which was then attached to the Istanbul Declaration. However, following the Istanbul summit meeting, the Kazakh officials showed some doubts in going along with the planned pipeline. They even made it clear in several occasions that Kazakh interpretation of  "Multiple Pipelines Idea" was different from the US interpretation. The main difference was that Kazakhstan considered the Iranian route as a possible way that should be considered. It seems that several points changed the Kazakh position in this regard:

 

A-     The new expansion of Kazakhstan relations with the USA. In addition to previous ties, during the US operations in the region against the terrorism, which included the operation in Afghanistan, Kazakhstan proved to be a good ally. They offered facilities to the US authorities that even long time US allies were reluctant in offering them.

B-     Conclusion of agreements between Kazakhstan and the Russian Federation, and also between Kazakhstan and Azerbaijan Republic regarding division of the Caspian Sea's seabed according to the  "Modified Median Line".  This gives the Kazakhstan the biggest share of the Caspian Sea's seabed (about 28 %). Now, Kazakhstan is more focused on the issue of getting its oil to the world markets in any possible way.

C-     No progress was achieved in the option of Iranian route.

D-     Discovering of new oil and gas fields in Kazakhstan.

 

5-      The Russian Federation has reduced the degree of its opposition to the Baku-Ceyhan pipeline. This is partly due to:

 

A-     The new policy of Russia in establishment of closer relations with Azerbaijan. Russians may even get themselves involved in building or investing of the pipeline (for example, through buying a small part of the SOCAR's shares).

B-      Persuasion of Azerbaijan Republic to finalize the agreement between Russian Federation and Azeri officials regarding the division of the Caspian Sea's seabed according to Russian formula of "Modified Median Line".

C-     Discovery of new oil fields in the Russian section of the Caspian Sea.

D-     New Russian cooperation with the Western countries, especially the USA in getting the Caspian oil and gas to the world markets.

 

It seems that Iran is the biggest loser here.

 

About the author: Dr. Bahman Aghai Diba is a consultant on international law affairs for several US companies in Washington DC area.

 

... Payvand News - 5/27/05 ... --



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