Publication: Eurasia Daily Monitor Volume: 2 Issue: 105

At the Baku inauguration events, President Nursultan Nazarbayev confirmed Kazakhstan’s intention to develop a trans-Caspian oil transport system, linked to the Baku-Tbilisi-Ceyhan (BTC) pipeline. If achieved on the scale that is now envisaged, this export route could deeply dent Russia’s near-monopoly on the transit of Kazakhstani oil.

At present, Kazakhstan ships only some 3 million tons of oil annually across the Caspian Sea to Baku. That oil travels via Azerbaijan to Georgian ports on the Black Sea. While in Baku, Nazarbayev held out the prospect of “turning that small stream of oil into a big river” or a “deep sea.” He also proposed changing the abbreviation BTC into ABTC — a reference to Atyrau, the point of origin of Kazakhstan’s trans-Caspian oil shipments. Kazakhstan’s Deputy Prime Minister Daniyal Akhmetov and Azerbaijan’s State Oil Company chairman Natig Aliev announced that Kazakhstan’s annual inputs into BTC would reach 20 million tons after 2010 and up to 30 million tons after 2015. Nazarbayev and Akhmetov reconfirmed these intentions in general terms during Turkish Prime Minister Regep Tayip Erdogan’s May 26-27 visit to Kazakhstan.

Kazakhstan’s government plans to develop a national tanker fleet and lay a seabed pipeline connecting Atyrau or the nearby Kuryk with BTC. Kazakhstan expects its annual oil output to rise from some 50 million tons extracted in 2004 to approximately 100 million tons by 2010 and circa 150 million by 2015. Of that amount, Kazakhstan expects to use internally only 20 to 25 million tons annually, and export the remainder.

Most of that output increase is expected to come from the super-giant offshore Kashagan field, now on the threshold of commercial development by the multinational KCO consortium. Four of the consortium’s shareholding companies — the project operator Agip/ENI of Italy, Total of France, ConocoPhillips of the United States, and the Japanese-based Inpex — are also shareholders in the BTC pipeline company. As such, they are entitled to preferential tariffs for using that pipeline. This overlap increases the chances of a timely start to the trans-Caspian oil pipeline project.

The Baku Declaration on Developing and Expanding the East-West Energy Corridor was signed during the inaugural events by U.S. Energy Secretary Samuel Bodman, Turkey’s Energy and Natural Resources Minister Hilmi Guler, and Ministers of Foreign Affairs Elmar Mamedyarov of Azerbaijan, Salome Zourabichvili of Georgia, and Kasymzhomart Tokayev of Kazakhstan. However, the expected signing of a Kazakhstan-Azerbaijan framework agreement on the transportation of Kazakhstani oil across the Caspian Sea and via Azerbaijan was postponed, pending further negotiations.

The Baku Declaration’s signing and the ABTC acronym do not necessarily herald prompt action. Back in 1999, the presidents of the United States, Azerbaijan, Georgia, Turkey, and Kazakhstan (Nazarbayev is the only one still in office among the five) signed the Istanbul declaration to support the East-West Energy Corridor. Shortly thereafter, Nazarbayev first proposed the ABTC brand for the project. However, Russia’s overt political opposition (in tandem with Iran) and Russian covert pressures blocked any action on trans-Caspian oil and gas pipelines from Kazakhstan and Turkmenistan, respectively.

Moscow’s resistance seems set to persist. After opposing the Baku-Ceyhan project for almost a decade, it now frowned on the pipeline’s inauguration events in Baku. Russian President Vladimir Putin’s Special Representative for International Energy Cooperation, Igor Yusufov, declined the invitation to attend, claiming that he “was unwell (zabolel).” Only two days prior to the Baku events, however, Yusufov had conferred with another frustrated party, Iran’s Moscow ambassador, in a meeting replete with anti-Western remarks (Interfax, May 25).

Konstantin Kosachev and Mikhail Margelov, chairmen respectively of the Duma and Federation Council international affairs committees, reiterated on this occasion the familiar repertoire of Moscow’s anti-BTC arguments: The pipeline “goes to the West, bypassing Russia,” is “political rather than economic,” its “profitability is a big question mark,” it is “doubtful whether there is enough oil to fill the pipeline,” the three countries along the route (Azerbaijan, Georgia, Turkey) “are not 100% stable,” and the pipeline could give the United States and other Western countries an excuse to deploy troops (Interfax, May 25). In a similar vein, the governmental Rossiiskaya Gazeta remonstrated (May 26), “Baku Says No to Russia, but Yes to America.”

Having lost the contest on the western Caspian shore, Moscow will undoubtedly try to maintain control of the transit routes from the eastern Caspian shore where far larger reserves of oil and gas are concentrated.

(Turan, Azerbaijan TV Channel One, Kazakh TV Channel One [Astana], Khabar TV [Almaty], Interfax, May 24-26; see EDM, May 16)