EurasiaNet Business & Economics - Aliyev's Health Status Won't Have Large Impact on Baku-Tbilisi-Ceyhan Pipeline

BUSINESS & ECONOMICS

ALIYEV’S HEALTH STATUS WON’T HAVE LARGE IMPACT ON BAKU-TBILISI-CEYHAN PIPELINE - EXPERTS
4/22/03

Azerbaijani President Heidar Aliyev has been a vital promoter of a pipeline project that would transport Caspian Basin energy resources from Baku through Georgia and on to the Turkish port of Ceyhan. Aliyev’s recent health scare has added to lingering questions surrounding the project’s feasibility. However, many experts believe that pipeline construction is far enough along that it is no longer dependent on Aliyev’s ability to remain in power in Azerbaijan.

The 1,760-kilometer pipeline, known as Baku-Tbilisi-Ceyhan (BTC), has been Aliyev’s signature project. BTC has long been surrounded by profitability concerns, even after the Azerbaijani president hosted a ground-breaking ceremony last September. [For background see the Eurasia Insight archive]. Aliyev’s political skills and influence have played a key role in keeping the politically sensitive project on track amid numerous disputes and delays. [For background see the Eurasia Insight archive].

The Azerbaijani leader has been in frail health in recent years, having twice made extended stays at a clinic in the United States to receive treatment for various ailments since 2002. [For background see the Eurasia Insight archive]. The prospect of Aliyev’s sudden departure from the political scene was reinforced by an April 21 episode, in which the president failed to complete a televised speech because of apparent heart problems. [For additional information see the Eurasia Insight archives].

Aliyev and his aides have issued assurances that the president remains fit to fulfill his duties and even run for re-election in October. Nevertheless, Aliyev’s latest bout with health problems, along with the occupation of Iraq by US military personnel, have prompted speculation about the future of BTC. Many analysts believe neither the state of Aliyev’s health, nor the prospect of increased amounts of Iraqi oil hitting the global market, will exert a great effect over BTC’s fate.

Though the United States now effectively controls the flow of oil from Iraq, says Julia Nanay, a senior director with PFC Energy in Washington, the $2.9 billion BTC "remains a very strong focus of the US Government."

Other oil analysts say that it will be at least several years before Iraqi oil starts flowing onto the world market in pre-1991 levels, as it will take time to assess the damage done to Iraq’s oil infrastructure and then make the necessary repairs. Thus, if BTC can keep to its current schedule of starting to pump oil in 2005, it should be able to establish itself as a supply source.

At the same time, expectations for BTC have diminished in recent years. Few experts are now willing to predict, for example, that Azerbaijan will emerge as "the new Kuwait." Some still see Azerbaijan as reaping potentially huge oil profits, but their forecasts, they admit, could be influenced by contingency factors.

The contingencies, most of which have to do with timing, are the same ones that have frustrated Aliyev and BP, the Anglo-American conglomerate that leads BTC’s construction consortium, for years. Many of them have their origins in Turkey. On April 22, for example, the independent Baku Today newspaper reported that Turkish Foreign Minister Abdullah Gul confirmed receiving a letter from BP that chided the Turkish government for letting problems about taxation and land acquisition slow construction of the pipeline’s Turkish terminal.

Gul reportedly promised that the government would surmount these delays promptly. But Nanay pointed out that Turkey’s government remains relatively new. [For background see the Eurasia Insight archive]. Thus, those in charge of energy-related issues � including many top officials at the Energy Ministry, as well as the new head of Botas, the state pipeline company � may need time to master the intricacies posed by the BTC project.

BTC construction is also dogged by ecological concerns connected mainly with the pipeline’s proposed route in Georgia. [For additional information see the Eurasia Insight archives]. On April 19, word spread that the European Bank for Reconstruction and Development was withholding a hoped-for loan to Azerbaijan to fund BTC construction, apparently to allow for further ecological impact studies.

President Aliyev has worked doggedly to surmount doubts about BTC, experts say, and his enthusiasm and forceful backing for the project may have made the difference in making it politically palatable for the international community, especially the United States, to commence construction. While Aliyev could not eliminate all obstacles to pipeline construction, at this stage his possible departure from the scene would not be enough to scuttle BTC.

"I tend to think that any difficulties resulting from these developments and the possible death of President Aliyev could delay the project, but I doubt if they will knock it out altogether," says Nanay.

The Central Eurasia Project aims, through its website, meetings, papers, and grants, to foster a more informed debate about the social, political and economic developments of the Caucasus and Central Asia. It is a program of the Open Society Institute-New York. The Open Society Institute-New York is a private operating and grantmaking foundation that promotes the development of open societies around the world by supporting educational, social, and legal reform, and by encouraging alternative approaches to complex and controversial issues.

The views expressed in this publication do not necessarily represent the position of the Open Society Institute and are the sole responsibility of the author or authors.