Publication: Monitor Volume: 6 Issue: 44

In apparent deference to short-term political and financial considerations, the Georgian government is delaying progress on the Baku-Tbilisi-Ceyhan oil export pipeline project. The other participants are Turkey, Azerbaijan, the international consortium of oil producers AIOC–Azerbaijan International Operating Company, led by British Petroleum Amoco–and the United States as a major moving force behind the project. The partners are unable to reach agreement with the Georgian government on the conditions for the transit of oil through Georgian territory and for the operation of the Georgian stretch of the pipeline. A series of closed-door meetings in January and February in Ankara, Tbilisi, Baku and Istanbul–the latest of them in Istanbul on February 26-28–ended inconclusively.

Georgian demands are said to include:

–the international investors to bear the costs of compensating Georgian land owners for the land tracts to be expropriated along the planned pipeline route;

–Georgia to be exempted from responsibility for the pipeline’s security and financial liability in case of “force majeure” incidents;

–the transit tariff accruing to the Georgian government to be raised to 20 cents per barrel–from a far lower level that had been envisaged–on the Georgian stretch of the pipeline;

–Georgia to be allowed to retain for its own use–presumably for processing at a yet-to be built refinery in Supsa–a 3 percent quota of the crude oil bound for Turkey from Baku;

–the partners to finance environmental protection measures along the pipeline route “according to Western environmental standards;” and

–Georgian companies guaranteed to participate as subcontractors in certain pipeline construction operations.

The other parties’ reactions to these demands range from public outbursts of frustration–as in the case of Azerbaijan’s President Haidar Aliev and his son Ilham, first vice chairman of Azerbaijan’s State Oil Company–to a wait-and-see attitude in the case of AIOC and quiet diplomacy by the United States and Turkey in an effort to address Tbilisi’s objections, short of raising the overall cost of the project. Turkish President Suleyman Demirel has assigned a special envoy to shuttle to Tbilisi and Baku in a mediation effort. Turkey, moreover, is offering to provide military training, electronic surveillance systems, arms and ammunition to help Tbilisi maintain the security of the pipeline.

Observers in the region detect also some strictly political considerations behind Georgia’s position. The country is in the midst of a presidential election campaign. President Eduard Shevardnadze, seeking reelection to another five-year term, apparently considers it important to avoid an exacerbation of relations with Russia ahead of the April 9 balloting. Such a tactic may reflect Shevardnadze’s and his advisers’ recently expressed concern that Russia’s conduct toward South Caucasus countries is being shaped primarily by the “special services,” with their record of rogue operations in the region. Shevardnadze’s team also apparently feels that any pipeline deal that would be signed ahead of the presidential election would be attacked by his opponents as disadvantageous, almost irrespective of its terms. If these interpretations are correct, the Baku-Ceyhan project will remain on hold until after the Georgian election, but would have to resume its progress shortly afterward, so as to lend substance to Georgia’s stated dedication to Caspian oil and gas transit projects (The Turkish Daily News, Caspian News, Turan, Dow-Jones Newswires, February 25-29, March 1).

The Monitor is a publication of the Jamestown Foundation. It is researched and written under the direction of senior analysts Jonas Bernstein, Vladimir Socor, Stephen Foye, and analysts Ilya Malyakin, Oleg Varfolomeyev and Ilias Bogatyrev. If you have any questions regarding the content of the Monitor, please contact the foundation. If you would like information on subscribing to the Monitor, or have any comments, suggestions or questions, please contact us by e-mail at pubs@jamestown.org, by fax at 301-562-8021, or by postal mail at The Jamestown Foundation, 4516 43rd Street NW, Washington DC 20016. Unauthorized reproduction or redistribution of the Monitor is strictly prohibited by law. Copyright (c) 1983-2002 The Jamestown Foundation Site Maintenance by Johnny Flash Productions