Caspian Oil to the West, an Iranian-Russian deal on the Horizon? 
by Dr. Cyril Widdershoven

As there is an ongoing race at present between the US, Russia and Iran, all competing for the right to bring fuel from outside the Caspian city of Baku, to the hungry markets of the West, experts state that a US-backed plan to ship the oil via Turkey, bypassing Russia, is slowly gaining the upper hand.

Oil companies could begin drawing up plans for a 1,080 mile pipeline from Azerbaijans capital of Baku to the Turkish port of Ceyhan as early as June. If it progresses on schedule, construction could begin by summer 2002, and oil could flow before the end of 2004.

The chances (for the pipeline) are increasing every day, said Sabit Bagirov, an Azeri political analyst, who served as president of the state oil company from 1992-93. Skeptics however caution that a resurgent Russia may put up a stronger fight as the pipeline moves forward and that even after paying $120 million for the engineering plan, oil companies could back out of the $2.7 billion project. Up till now, the new US government also to put its weight behind the plan, which has not yet been done. Clintons government was strongly supporting the non-Iranian/non-Russian option. 

The oil pipeline has been a key part of a US policy to lure the newly independent states of the Caucasus and Central Asia out of Russias orbit and towards the West. The projected pipeline would bring 1 million bpd to Southern Turkey. It would reduce the Wests dependence on Gulf exporters and could lead to lower gas prices. It also would mean that Caspian oil producers, such as Kazakhstan, Turkmenistan and Azerbaijan, would not depend on Russian pipelines for shipping their oil. The above area is believed to have proven oil reserves of up to 40 billion barrels; much more could be discovered in the near future. Kuwait in respect has proven reserves of 96 billion barrels.

Higher oil prices and new oil finds in the Caspian have made the US-backed plan more feasible than a short time ago. 

However, all will not only be decided by an outside power factor such as the US, regional configurations are more important for the stability and future of the region. Russia has put up the pressure to get Caspian oil through its Black Sea port. Russian president Vladimir Putin visited Azerbaijan in January. At about the same time, the Russian navy held exercises in the Caspian, a move many Azeris saw as a pointed reminder of Russias power and possible long-arm. Russia still exists that the oil should flow via its port of Novorossiisk on the Black Sea. That option could cost as little as half the $3 per barrel that the Baku-Ceyhan route will cost. Russia is doing whatever it can to block the project, Rasim Musabeyov, a political analyst and chairman of Azerbaijans Musavat opposition party stated.

Not only Russia is engaged in strong-arm politics, Iran is playing its own part. The latter has proposed the oil be sent by barges across the Caspian to northern Iran, where there have been oil shortages. An equal amount of oil would then be shipped to the West from Iranian oil fields, some 400 miles to the south. That is by far the cheapest option available, but Azeri and American officials are extremely opposed. Azeri non-cooperation is largely based on its fears and suspicion of Iran, both countries are Shiite but Azerbaijan is totally secular.

Not only political considerations are still restricting the developments, there are still fears that there will not be enough oil to fill up the pipeline. Companies that are backing the project are expected to produce in 2004 only about half the 1 million bpd the pipeline needs to be profitable. 

However, with this in mind, the visit of Irans president Khatami to Russia this week, the first Iranian presidential visit to Russia since the Iranian revolution, is of the utmost importance. If taken into account the growing willingness of both countries to extend its already in-depth cooperation in the energy and oil sectors, it is obvious what is going to be discussed. Additional fears are spreading that cooperation will also be linked to the defense sectors. The energy cooperation is already including the nuclear fields. Russia has, under Putin, stated that it is no longer observing an agreement with the US under which it was to stop selling conventional weapons to Iran after December 31, 1999. On March 12, Russian press agency TASS published that Colonel-General Leonid Ivashov, chief of the Russian Defense Ministry directorate for international military cooperation that Russia intends to develop military-technical cooperation with Iran.  To begin with, we have a lot of coinciding interest, he stated. We cooperated quite well (in the anti-terrorism field) and continue to cooperate to bring about a settlement in Afghanistan. Ivashov also said that Iran had shown interest in the training of its specialists in Russia, the purchase of military hardware and new specimens of armaments that are allowed by international agreements. However, growing nuclear and missile technology cooperation is becoming again an issue. Integration of both countries international and regional aspirations will have its influence on the energy constitution of the Caspian. In the end, the West will have to think of an answer, without total dependency on US foreign policy making. History has taught us that to rely on an outside power to provide energy security and military stability does not work. Europe has to build its own fist and deal with out-of-area complications. The security of energy and economic growth should be of the utmost importance to the EU/WEU and the West in total. 

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