ECONOMY

Construction of Baku-Ceyhan oil pipeline begins; Russia protests

SANGACHAL, Azerbaijan (AP) – US Energy Secretary Spencer Abraham joined the presidents of Azerbaijan, Georgia and Turkey yesterday for what he called «one of the most important energy undertakings» – the start of construction of the Baku-Ceyhan oil pipeline. The pipeline from Azerbaijan’s Sangachal terminal, 25 miles (40 kilometers) south of the capital Baku, to the Turkish Mediterranean port of Ceyhan has been under discussion for eight years. When completed, it is expected to reduce dependence on Gulf exporters and Russian pipelines. Abraham, Azerbaijani President Geidar Aliev, Turkish President Ahmet Necdet Sezer and Georgian President Eduard Shevardnadze, whose territory the pipeline will cross, participated in yesterday’s groundbreaking ceremony. «This project guarantees peace, security and stability in the region and still further unites three countries and three peoples,» Aliev said at the opening ceremony. The 1,091-mile (1,780-kilometer) pipeline, which will be operated by BP, will carry Caspian energy resources – the world’s third largest – to a Turkish port en route to Western markets. It has won strong support from the USA, which is eager to find a more stable energy source outside the sway of the Middle East. Aliev said yesterday that US help in championing the pipeline had been crucial. «This project is one of the most important energy undertakings from America’s point of view, as well as for this region,» Abraham said Tuesday at a meeting with Aliev. Reading a letter from US President George W. Bush, Abraham said during Wednesday’s ceremony that the project would increase the world’s energy security and strengthen the sovereignty and independence of the nations involved. «Although it will be some time before the first barrel of oil flows through this pipeline, it has already made a significant contribution to the future of this region,» Bush said in the letter. Abraham said the project could serve as a model for further endeavors, adding that it opened the door to investment in this impoverished region. Construction of the pipeline, estimated to cost about $3 billion, is to be completed by early 2004, and the first oil is expected to flow through it a year later. Experts expect about 349 million to 421 million barrels of oil to move through the pipeline every year. Fuad Akhundov, a spokesman for Aliev’s administration, told Russia’s Echo of Moscow radio that the pipeline was expected to generate $100 million a year to the regions through which it passes. Georgian President Shevardnadze, whose small country is heavily dependent on energy from Russia, declared the project to be «Georgia’s main achievement in the past 10 years since it declared independence.» Georgia is particularly eager for new energy sources given the new low point reached in its relations with Russia. However, the project has not won unanimous support. The Kremlin has refused to participate and fears the pipeline will sideline Russia from the Western market. Oil from Azerbaijan is now shipped through Russian and Georgian lines. Russia’s biggest oil company, Lukoil, did not join the Baku-Ceyhan consortium. «We are ready for cooperation but will not put up with the attempts to crowd Russia out of regions in which we have historic interests,» Foreign Minister Igor Ivanov said of the pipeline in New York, according to ITAR-Tass news agency. He added that Russo-American interaction in the implementation of the project to build an oil pipeline from Kazakhstan to Novorossiysk is «a positive example of cooperation.» Some Western oil companies also have their doubts, saying the proposed route is an expensive alternative to shorter routes through Russia or Iran. Analysts say the Baku-Ceyhan path was chosen for strategic and not commercial reasons. Ivanov believes that «Russia and the USA must develop cooperation in energy projects when they look economically expedient.» Ivanov said that a special statement on cooperation in energy was adopted during the Russo-American summit in Moscow in May and a special forum on these problems will be held in early October in Houston.