Business & Economics:
CASPIAN BASIN LEADERS HAIL OPENING OF BAKU-TBILISI-CEYHAN PIPELINE
5/25/05

The presidents of Azerbaijan, Georgia, Kazakhstan and Turkey gathered in Baku on May 25 to celebrate the formal opening of a pipeline that will break Russia's energy-transport monopoly in the Caspian Basin. US Energy Secretary Samuel Bodman, who also attended the opening ceremony, said the pipeline, known as Baku-Tbilisi-Ceyhan, would "defuse the current tension on world oil markets."

Although oil started pumping into the 1,760-kilometer (1,100 mile) pipeline on May 25, it will take up to six months for it to fill completely, meaning natural resources will not be ready for export from the Ceyhan terminal until the end of this year. The $4-billion Baku-Tbilisi-Ceyhan (BTC) pipeline, built by a consortium led by British Petroleum, was hailed not only as an engineering marvel, but also as an archetype for regional political cooperation.

"Some doubted the feasibility of the BTC project, while others tried to raise obstacles, but failed," Azerbaijani President Ilham Aliyev said, adding that governmental and corporate participants in the BTC project acted as "one team and one family."

President Mikheil Saakashvili of Georgia characterized BTC's opening as a "geopolitical victory" for Caspian Basin nations. Securing an independent energy export source will allow both Georgia and Azerbaijan to more effectively resist geopolitical pressure exerted by Russia, regional political analysts suggest. [For additional information see the Eurasia Insight archive].

Just days before the opening ceremony, Azerbaijan's government drew international criticism after security forces broke up a Baku rally staged by supporters of opposition political parties. [For background see the Eurasia Insight archive]. The incident, however, did seem to detract from the festivities surrounding the BTC opening.

Aliyev said BTC marked a "serious step forward" for Azerbaijan's economic development. Meanwhile, Bodman, in an interview with Azerbaijan's Lider TV broadcast on May 24, suggested the pipeline would have economic benefits for all Caspian Basin states. "It will open up new economic opportunities for Azerbaijan and all the regional countries, boost energy independence and supply additional fuel necessary for the developing economies," Bodman said.

Russian officials were clearly unenthused about the BTC ceremony, as the pipeline stands to break Russia's virtual monopoly in regional export routes. Bodman and other dignitaries in Baku sought to reassure Moscow, saying that BTC was not intended to undermine Russia's export position. Turkish President Ahmet Necdet Sezer stressed that regional attention would soon turn to developing a North-South trade corridor that would include Russia.

Russia's regional energy envoy, Igor Yusufov, ended up not attending the May 25 festivities, citing illness, the Interfax news agency reported. Russian political leaders tend to see the BTC project as motivated by political objectives, rather than economic necessity. Western nations, in particular the United States, have been ardent supporters of BTC "in order to create a stable alternative for transferring Caspian energy resources to the West bypassing Russia and some other states, such as Iran," Interfax quoted Konstantin Kosachyov, head of the Russian parliament's International Affairs Committee, as saying.

While in Baku, Kazakhstani President Nursultan Nazarbayev confirmed that Astana would export energy via BTC. "This route will be one of the main ways [for Kazakhstan] to supply world markets," Nazarbayev said. Nazarbayev has made vague commitments to the BTC route in the past, but his May 25 comments appeared to make Kazakhstani participation certain. Some analysts believe that without Kazakhstani oil flowing through BTC, the pipeline might lack the volume to be economically viable.

"By bringing Kazakh oil to the pipeline, BTC will be stronger, and the Kazakh oil will have access to the Mediterranean [markets]," said Sezer, the Turkish president.

According to some estimates, Kazakhstan's oil production could approach 150 million tons per year by 2015. In signaling that Kazakhstan would export oil via BTC, Nazarbayev stressed that the country would also use other export routes. Turkish Prime Minister Recep Tayyip Erdogan was scheduled to travel to Kazakhstan on May 26 for talks that will aim, in part, to maximize the share of Kazakhstani oil that is exported via BTC.

Editor’s Note: EuriasiaNet contributor Mevlut Katik provided reporting for this article.