Books on Azerbaijan
Update No: 294- (28/06/05)
New pipeline gets Caspian oil to market without Russia
A great event has occurred in Azerbaijan, longed for by some and dreaded by
others. Amid criticism from human rights groups, world leaders gathered in
Azerbaijan on May 25th to fete the first oil flowing into a long-hoped-for
Caspian pipeline, which connects energy-rich Azeri oil fields through Georgia
and on to a shipping terminal on Turkey's Mediterranean coast, by-passing
Heads of state from Turkey, Georgia and Kazakstan were on hand, as was the US
energy secretary, Samuel Bodman, and Lord Browne, the chief executive of the
British energy giant BP, which led the consortium bringing Caspian oil to
market. Presidents Ilham Aliev of Azerbaijan, Ahmet Sezer of Turkey, Mikhail
Saakashvilli of Georgia and Kazakhstan's Nursaltan Nazarbayev attended the
inauguration ceremony at the Sangachal terminal, 25 miles south of Baku. Their
presence highlighted how energy from the Caspian region is emerging as an
alternative source to the Middle East and Russia.
The £2.2bn ($3.6bn) pipeline will deliver a million barrels of crude oil a day
to the Mediterranean Sea, and is set to become a vital gateway for Central Asian
energy resources to the West. The Baku-Tbilisi-Ceyhan (BTC) pipeline will run
for 1,100 miles, 1,760 km, extending from the Azeri-Chirag-Deepwater Gunahli (ACG)
oil field through Azerbaijan and Georgia, and ending at the Ceyhan terminal on
Turkey's Mediterranean coast. It is one of the world's longest pipelines,
according to the International Finance Corporation, an arm of the World Bank, an
investor in and lender to the US$3.6bn project.
The consortium of 11 partners in BTC is led by BP, the largest shareholder, with
30.1%, and the operator of the pipeline. Other partners include SOCAR, or the
State Oil Co of Azerbaijan (25%), Incoal (8.9%), Statoil (8.7%), TPAO, or
Turkish Petroleum (6.5%), ENI (5%), TotalFinaElf (5%), Itochu (3.4%), Inpex
(2.5%), ConocoPhillips (2.5%), and Amerada Hess (2.3%).
Washington, uncomfortable at its reliance on oil from the Middle East, has long
sought the BTC as a bridge not only for Azeri oil, but also for the massive
energy resources of Kazakhstan, a country the size of Western Europe. Many
analysts see greater potential for the BTC as a conduit for central Asian oil,
principally from Kazakhstan. Kazak President Nazarbayev unveiled plans to link
the western Kazakh oil port of Aktau to the BTC.
The Bush administration first recognised the pipeline's potential in May 2001,
when an energy policy review spearheaded by the vice-president, Dick Cheney,
said the Kashagan oilfield in Kazakhstan was capable of exporting 2.6m barrels a
day if pipelines like the BTC were operational. The report recommended Mr Bush
to order the departments of state and energy to "establish the commercial
conditions" to facilitate Kazakh exports via the BTC.
But Azerbaijan the main beneficiary now
Ilham Aliyev, the president of Azerbaijan, opened the tap permitting the first
oil into his country's section of the pipeline, named after his father, Heydar
Aliev, whom he succeeded after an election marred by violence and fraud
allegations. His government has a 25% stake in the project that he expects to
help the economy grow by 18%. Oil from the pipeline is not expected at the
Turkish port of Ceyhan until August 15, and will supply 1% of global demand.
"Some doubted the feasibility of the Baku-Tbilisi-Ceyhan project, while
others tried to raise obstacles," Interfax quoted him as saying. "The
union of Azerbaijan, Turkey, Georgia and the United States ... made this a
reality. Some did not believe in the realisation of this project, some tried to
disrupt it, but the support of the United States and the activity of BP helped
realise the project," added Aliyev.
"After many years of talking and building, they finally put oil in the
pipeline," said Stephen O'Sullivan, oil industry analyst at UFG, a Moscow
brokerage partly owned by Deutsche Bank. With a capacity of 10 million barrels
and 400,000 barrels a day of output, "the pipeline will take at least 5
days to be filled - and then some to fill the tanks" waiting to deliver oil
to world markets, he added.
Avoiding Russia and the Bosporus
For the United States and other Western oil-consuming nations, the BTC
pipeline is attractive because it avoids Russia and the environmentally
sensitive Bosporus Straits.
The United States had at one time banked on Russia as its top energy alternative
to the Middle East. But the US energy secretary made clear that the United
States was also seeking back up sources elsewhere, in particular the Caspian
region. "Russian oil production is flat-lining," Bodman said in
Moscow. "That fact is clear to both the Russian government and outsiders.
It is in the interest of the United States to have greater alternative sources
BTC is one of those alternatives sources, Bodman added. "We view this as a
step forward in the energy security of the region, and which provides for
investment in oil and maybe liquefied natural gas. This contributes to the
increased supply of oil in the world."
The move away from the Russian pipelines will clearly benefit Washington, which
is keen to immunise its energy supplies from possible friction with Russia and
Iran. The US is also expected to increase its minimal military presence in
Azerbaijan, which will further rile Moscow. The internal politics of Turkey also
needed to be stabilised as the Kurdish insurrection, now abated, with its
potential to sabotage such a lengthy pipeline across the Anatolian mountains,
earlier seemed a major hazard
Human Rights Watch demurs
Meanwhile, the pipeline has stoked controversy on several fronts. Apart from
the environmental hazards (it passes close to a national park in Georgia and
traverses highly seismic landscape throughout its route), the pipeline has
brought Western powers into partnership with governments with dreadful human
rights records, notably Azerbaijan itself.
Amid the celebrations, Human Rights Watch on May 24th issued a letter to
President Aliyev, denouncing the detention of Azeri opposition figures before
the BTC ceremony. The detentions provided an awkward political flashpoint as
oil-consuming nations sign on to do business with Azerbaijan which is a
Baku city authorities denied the Ugur, or "Success" opposition bloc
permission to hold a rally on May 28th on the grounds that it was to be held too
soon before the BTC opening on May 25th. Police used force, beating participants
with batons and detaining more than 100.
"The timing of this denial is especially regrettable," Human Rights
Watch wrote in the letter. "Azerbaijan has shown that it can take a leading
role internationally by committing itself to transparency principles in the
But the events on May 21st underscore that it has yet to take significant steps
to open up its political processes, to ensure that a plurality of groups can
voice their opinions on political and social issues."
"This is confirmation of American double-standards - supporting regimes
that are authoritarian, but part of their energy package," said the analyst
Lilya Shevtsova of the Carnegie Endowment, in Moscow. She conceded that the BTC,
nevertheless, gave Azerbaijan and Kazakhstan independence from Russia, upon
whose pipelines they had previously relied to export their oil. Oil supply
trumps democracy in US foreign policy, as has been shown in numerous other parts
of the world.
Azeri leader, Ukrainian official discuss energy cooperation
Azerbaijani President, Ilham Aliyev, received the first deputy minister of fuel
and energy of Ukraine, Oleksiy Ivchenko, at the presidential palace recently,
Azartac News Agency reported.
The head of the Azerbaijani state described the inauguration of the Azerbaijani
section of the Baku-Tbilisi-Ceyhan (BTC) oil pipeline as a remarkable event and
expressed his gratitude for the participation of the Ukrainian side in the
ceremony and the fact that President Viktor Yushchenko sent a letter of
President Aliyev asked the Ukrainian official to pass on his greetings and
gratitude to the Ukrainian leader.
Recalling with satisfaction earlier meetings with his Ukrainian counterpart,
President Aliyev expressed his confidence that relations between the two
countries would continue to develop and strengthen.
Oleksiy Ivchenko said he had read out the letter of congratulation on behalf of
the Ukrainian leadership at the ceremony to inaugurate the Baku-Tbilisi-Ceyhan (BTC)
"President Viktor Yushchenko has instructed me to say to you that the BTC
project was implemented thanks to the far-sighted policy of Azerbaijan's
national former leader Heydar Aliyev. This pipeline will continue to be an
important component of Azerbaijan's policy even in 100 years to come. We are
sure that cooperation with Azerbaijan, which is based on many years of good
relations, will be continued," he said.
Oleksiy Ivchenko presented Ukrainian President Viktor Yushchenko's letter of
congratulation to Azerbaijani President Ilham Aliyev. President Aliyev asked the
Ukrainian deputy minister to pass a special medal made for the occasion of the
pipeline launch on to the Ukrainian president.
FOREIGN ECONOMIC COOPERATION
Kazakstan and Azerbaijan to sign economic agreements
Kazak President Nursultan Nazarbayev was expected to visit Baku on May 24th
to 25th, when Azerbaijan and Kazakstan will sign 4 or 5 economic agreements
especially in oil production and petrochemical engineering, Interfax News Agency
"Oil production is increasing in Kazakstan and we are interested in
collaborating in petrochemical engineering and studying Azerbaijan's experience
in this area," said the Kazak Ambassador to Baku, Andar Shukputov.
World Bank affirms 68m Euro loan to Azerbaijan
The World Bank board of directors has confirmed the extension of two loans for
Azerbaijan amounting to 68m Euro, Interfax News Agency reported.
Forty-eight million Euro will be extended under a project for modernising the
country's system for distributing electricity and the other 20m Euro under the
Poverty Reduction Support Credit (PRSC) project. The loan for the former project
is being offered for 20 years with an eight-year grace period. The funds would
be utilised for overhauling the Azerbaijan's central distribution system and
power transmission lines. The first PRSC loan tranche will be provided on
International Development Association terms for 35 years with a 10-year grace
period at an annual 0.75%.
Azeri president, Russian governor discuss boosting trade
Azerbaijani President, Ilham Aliyev, and the governor of Russia's Astrakhan
Region, Aleksandr Zhilkin, discussed boosting trade on 31 May, Azartac News
The Russian governor noted that President Aliyev and Russian President, Vladimir
Putin, had decided to double trade between the two countries.
Specific work is being done in Astrakhan for this purpose, Zhilkin said. He also
said that the Azerbaijani community was active in Astrakhan and that there was
close cooperation between Azerbaijan and the region.
The Azerbaijani president praised what he described as successful cooperation
with Russia's different regions and increasing volume of trade. He noted that
the activities of the Azerbaijani community in Astrakhan would play a role in
the development of relations between the two nations.
President Aliyev expressed confidence that cooperation between Azerbaijan and
Russia, including Astrakhan Region, would be expanded.