ECONOMY

Turkey inaugurates oil pipeline, bypassing Russia, Middle East

ANKARA – Almost a decade ago, US President Bill Clinton threw his weight behind a multibillion-dollar pipeline designed to bring the oil riches of the Caspian Sea to the West, bypassing Russia and tapping a source of crude outside the unstable Middle East. Critics derided the proposed 1,768-kilometer (1,100-mile) $3.9 billion pipeline which snakes through Azerbaijan, the mountains of Georgia and northern Turkey before hitting the Mediterranean coast, as too expensive and too difficult to build. Today, the leaders of those three nations will gather at the port of Ceyhan to formally inaugurate the pipeline. With oil now near $75 a barrel (triple the price it was when Clinton was president) and Iran harboring nuclear ambitions, the once-controversial project looks far more attractive. «No one would have thought that when oil reached Ceyhan it would be $75 a barrel,» said Suat Kiniklioglu, director of the German Marshall Fund of the United States’ Ankara office. «It’s a huge success.» The pipeline was part of a US strategy to diversify the sources and flow of oil imports, cutting the risk to consumers that any shock would affect oil supplies, sending prices higher. It began pumping late last month and some 430,000 barrels of oil are flowing each day, said Norman Rodda, construction manager for the Turkish section of the pipeline. That might only be a tiny fraction of the 85 million barrels per day that the world consumes, but with global production stretched and prices skyrocketing, «all supplies matter,» said David Knapp, senior editor for global oil market analysis at Energy Intelligence group in New York. «Additional oil coming into the Mediterranean market helps soften the increase in prices,» he said. «It hasn’t had a major impact yet, but it is possible that prices would have been higher if that oil was not on the market.» Officials at oil company BP PLC, the pipeline consortium’s main participant and the largest foreign investor in Azerbaijan’s oil sector, said they expect pumping to increase to 1 million barrels per day by 2008. Kazakhstan recently said it would begin pumping some oil through the pipeline and Azeri production is expected to be boosted to reach that goal. There is also now talk of building new pipelines across Turkey that would bring Russian oil and natural gas to European markets, and of another pipeline across Bulgaria and Greece that would allow Russian oil exports to bypass the crowded Bosporus, the strait that cuts through Istanbul. With most of the oil destined for European markets, Turks are hopeful that the pipeline will expand their influence in Europe as they press for European Union membership. Oil from Iraq is exported from the same port, but that flow has repeatedly been disrupted by insurgent attacks. «Turkey is increasingly going to become a more important energy corridor,» Kiniklioglu said. «There is certainly a recognition by Europeans, especially Eastern Europeans, that Turkey matters a lot to energy security.» But building the pipeline was a struggle. When it was first proposed, Russia opposed the venture and instead pressed for Caspian oil to flow through its territory, which many oil executives backed as a less expensive option. Iran also offered to let the oil pass through its territory, by far the cheapest option, but one that Washington vehemently opposed. The United States, backed by Turkey and Azeri leaders who wanted to see their country more independent of Russia and more closely tied to the West, strongly pressed for the pipeline. That was despite opposition from oil companies who supported cheaper options. Turkey was also insistent that the oil not flow through Russia, an option that would mean it would be exported on ships through the already-clogged Bosporus. «We all felt that independent access to international markets was essential to the future health and security and stability of the newly independent states,» US Ambassador Ross Wilson said in Istanbul yesterday. He called the pipeline «an economic lifeline to the world that is independent of any of the other players that may want to monopolize… or cut it off.» In November 1999, the leaders of Azerbaijan, Georgia and Turkey gathered in an ornate Ottoman palace on the shores of the Bosporus. With Clinton watching, they signed the agreement to build the Baku-Ceyhan pipeline and a second gas pipeline from Turkmenistan. «These pipelines will be an insurance policy for the entire world by helping to ensure our energy resources pass through multiple routes,» Clinton said at the signing.