Hailing the Pipeline to Somewhere

For just about a decade after construction plans were unveiled, detractors continued to refer to the Baku-Tbilisi-Ceyhan export route mockingly as "the pipeline to nowhere."

But on July 13, international oilmen, the governments that back them and a few odd-ball adventurers like myself will celebrate an extraordinary event: the official opening of the 1760 kilometer-long BTC pipeline connecting the Caspian basin's hydrocarbon riches to the eastern Mediterranean. [For background see the Eurasia Insight archive].

First mooted in the early 1990s by Azerbaijan's first post-Soviet government, BTC was initially viewed by many as a geopolitical fantasy. For most of the 1990s, the main the pipeline was hounded by concerns about its economic viability. Initial assessments of Azerbaijani reserves in its sector of the Caspian Sea proved to be highly inflated. In order to be viable, oil volumes needed to be brought from neighboring Caspian such as Kazakhstan and Turkmenistan but those states were declining to commit to the BTC for their own internal reasons. Then, crude oil prices fell in 1998-99, going from about $25 a barrel to something closer to the low teens. The price drop made the idea of sinking an estimated $2.5 billion into a new export pipeline from Azerbaijan seem like a bad joke. So did the future of the Azerbaijani oil industry itself. On- and off-shore explorations by foreign investors were coming up with dry holes, and doom and gloom was descending on the oil patch.

It was around then that my old pal Laurent Ruseckas, then a senior analyst for Daniel Yergin's Cambridge Energy Resource Associates, embarked on a PhD dissertation that centered on the familiar notion that economics would always triumph over politics, and used the BTC as a case study. In the preamble to the dissertation proposal, which he recently shared with me and my students as an example of how a well-argued piece of research could be so wrong, Laurent wrote: