The Great Caspian Sea Oil Pipeline Game

By Andrew I. Killgore

“[Baku-Ceyhan] would allow Israel to draw oil from Ceyhan [Turkey], the only Middle East government with which Israel has good relations.”

—George Chanturia, president of the Georgia state oil company.

In the 19th century, Czarist Russia and the British Empire jousted for advantage in Central Asia. This came to be called “The Great Game.” The long, drawn-out struggle between the two titans inspired all kinds of books, spy novels, tales of derring-do and film dramas that still titillate. The Great Game was “clean”—just one against one—but its real-life adventures were just remote enough and so little understood in the West that they acquired an aura of exotic romance.

Unlike the Great Game, however, the current “Great Caspian Sea Oil Pipeline Game” is “messy,” with many players and complex competing interests. Multiply the messiness by 10 because, although the oil companies involved overwhelmingly do not support it, Israel wants this longest and most expensive pipeline from Baku, Azerbaijan to Ceyhan (pronounced Jayhan), Turkey—Israel’s only Middle East ally, as indicated in the quote above. And when Israel is involved everything gets tangled, especially for the United States.

All kinds of estimates of the amounts of oil that may lie beneath the Caspian’s brackish waters are floating about, some putting the potential almost in a league with Saudi Arabia. Unfortunately for Baku-Ceyhan, however, Azerbaijan itself has so far found very disappointing amounts of oil. That means that, as of now, the only source of the extra oil that will be needed to make up the estimated one million barrels a day that an economically viable Baku-Ceyhan would require is Kazakhstan. The American-Israeli need for that extra oil explains an odd little item in the March 26 issue of London’s Financial Times. The U.S. is said to have “succeeded” in getting Kazakhstan to sign a memorandum that it “might” send oil across the Caspian to a future Baku-Ceyhan oil pipeline.

The same article quoted Kaireldy Kabyldin, head of Kazakhstan’s national pipeline company, as saying that his country was studying the feasibility of a pipeline route through Iran. “This would be the shortest and possibly cheapest route for oil to Asian markets,” Kabyldin told a recent London conference.

A blow against Baku-Ceyhan was struck on March 26, with the opening of a 950-mile-long pipeline linking Kazakhstan’s huge Tengiz field to Russia’s Black Sea port of Novorossiysk. “Now that Kazakh oil can go through [Tengiz-Novorossiysk] it undermines the case for…Baku-Ceyhan,” said analyst Daphne Ter-Sakarian in the Economist Intelligence Unit.

The only remaining possible—repeat, possible—source of the extra oil to justify economically a future Baku-Ceyhan line is Kazakhstan’s offshore (in the Caspian) Kashagan field, which may be very large. Although its full potential may not be known for several years, Phillips Petroleum Co. tells the Washington Report that two new wells, 20 miles apart, are very big. Still, Kazakhstan will have to agree to ship the oil across the Caspian Sea to Baku. That means an undersea pipeline, which Russia and Iran would strenuously oppose on environmental and other grounds.

The five states surrounding the Caspian Sea are Russia, Kazakhstan, Turkmenistan, Iran and Azerbaijan. Which state owns what part of the sea is up in the air. A summit of the five was scheduled for April to try to decide who can exploit what, or who can grant contracts to multinational companies.

Secretary of State Colin Powell has recently demoted the U.S. “special representative for the Caspian region” to merely a “special adviser.” Under the Clinton administration, two pro Baku-Ceyhan “special representatives” in a row, both with the rank of ambassador, had pushed Baku-Ceyhan against the opposition of the oil companies concerned. Powell’s action will hurt Baku-Ceyhan enthusiasts including Azerbaijan, Turkey and (of course) Israel.

A new development to encourage those still dreaming of Baku-Ceyhan is the sudden reversal of British Petroleum (BP) from anti- to pro-pipeline. Oil consultants at Washington’s Petroleum Finance Company (PFC) are puzzled by BP’s about-face.

Accused at a recent London conference of shifting grounds for political reasons, BP referred to large oil reserves in the southern Caspian. PFC experts tell the Washington Report that they are unaware of any new discoveries in that area.

Whether Baku-Ceyhan ever will be built is increasingly doubtful. Israel needs it to demonstrate to Turkey that Ankara’s alliance with the Jewish state“pays off.” If the line is built it will represent a new Israeli raid on the U.S. treasury, because Baku-Ceyhan will cost $1 billion to $2 billion more than would a line through Iran. The U.S. or an international lending agency under American influence will have to come up with the difference.

To increase Baku-Ceyhan’s chances the U.S. opposes any pipeline going through Russia or Iran. That has thrown the two old enemies together—surely an unintended consequence of a U.S. policy driven by Israel.

Andrew I. Killgore is the publisher of the Washington Report on Middle East Affairs.