-Caveat Lector-

>>>For about four years, I have been casually following the Caspian
oil story and now it seems that one of the least likely routes is not
the most likely.  For future reference, look out for Turkey to
identify the Kurds as something like terrorists and the pressure on
them will increase DRAMATICALLY.  Incursions (more) to follow into
Syria and Iraq will follow, to tame the Ways of the Kurd.  For a neat
map of the area and proposed pipeline routes, go here:
http://www.en.monde-diplomatique.fr/maps/IMG/arton2005.jpg
A<>E<>R


From
http://www.businessweek.com/print/magazine/content/01_52/b3763127.htm?
mainwindow
}}}>Begin
DECEMBER 24, 2001

INTERNATIONAL -- THE CONFLICT
Opening the Caspian Oil Tap
A pipeline long sought by the U.S. looks set to win approval

It's one of the world's great geopolitical fault lines. Since the
collapse of the Soviet Union a decade ago, the Caspian Sea has been a
jousting zone for cold war victor America and a humbled-but-still-
potent Russia. Their dueling has fueled a regional rivalry between
the oil-rich, former Soviet republic of Azerbaijan, which has
realigned itself as an ally of the U.S. and Turkey, and Iran--a major
purchaser of weapons from Russia.

But now, for the first time, there are signs that tension is easing
in this zone of confrontation. That's important, since the Caspian--
bordered by Russia, Iran, and the former Soviet republics of
Azerbaijan, Kazakhstan, and Turkmenistan--holds an estimated 110
billion barrels of oil. Indeed, the Caspian's reserves rival those of
Iraq, whose deposits of 113 billion barrels rank second in the world
only to OPEC leader Saudi Arabia's 262 billion barrels.

SHUT OUT. The most important changes are in Moscow's policy. After
years of resistance, the Russian government looks ready to give the
green light to a key oil pipeline that has long been championed by
the U.S. Once it is finished in 2005, the 1,750-kilometer-long
pipeline is expected to carry up to 1 million barrels of oil per day
from the Azeri port of Baku to Turkey's Mediterranean port of Ceyhan.
Russia has opposed the pipeline, whose prime developers are oil giant
BP and the governments of Azerbaijan and Turkey, because it skirts
Russian soil, shutting Moscow out of transit fees and other revenues.
The Kremlin has also accused the U.S. of trying to keep the Caspian a
solely Western preserve.

But in a sudden reversal, the Kremlin in late November invited
executives from BP to make their case for the Baku-Ceyhan route. That
gesture follows other moves by Russian President Vladimir V. Putin to
find common cause with the Bush Administration on issues such as
nuclear arms reduction since the September 11 terrorist attacks.
Although Moscow is still weighing its decision, both BP PLC and
Russian oilmen are optimistic the Kremlin will endorse the Baku-
Ceyhan project.

If Moscow gives the nod, companies such as Lukoil, the country's
largest oil producer, would be freed up to invest in the pipeline--
locking in access and preferential tariffs for shipping their own
oil. Both Lukoil and Russia's No. 2 oil producer, Yukos, have
expressed interest in buying minority stakes in the pipeline. "We
hope Russian companies [will] put a foot forward," says BP CEO John
Browne. Russian backing "would be the ultimate validation of the
[pipeline] project," notes Steven Dashevsky, oil analyst at Aton
Capital Group in Moscow.

This is a key deal for the West, and the Bush Administration has been
pushing it strongly. Energy Secretary Spencer Abraham recently
visited Moscow to discuss the pipeline and other energy issues. The
main advantage of the Baku-Ceyhan pipeline, proponents argue, is that
it avoids the accident- prone Bosphorus Straits, the choke point
between the Black Sea and the Mediterranean. The only other pipeline
from the region, which opened in November, stretches from Kazakhstan
to the Russian port of Novorossisk on the Black Sea, and requires
companies to ship oil on tankers through the Bosphorus to the
Mediterranean.

DASHED HOPES. Along the Baku-Ceyhan route, oil producers will have a second, secure 
option. That would help ease the West's dependence on OPEC. By 2010, the Caspian could 
represent 3% of global oil output and 5% of non-OP
EC oil production, says Moscow brokerage Renaissance Capital. Although the pipeline 
will cost $2.8 billion, BP has concluded the project is cost-effective. The company is 
now soliciting bids for the contract to install th
e pipeline.

Moscow's backing of the Baku-Ceyhan pipeline also would send a strong political 
message to Iran and Central Asian countries that Russia broadly shares American goals 
in the region. That's likely to dash Tehran's hope for
yet another pipeline stretching from Kazakhstan through Iran to the Persian Gulf. U.S. 
Secretary of State Colin L. Powell signaled American opposition to an Iran pipeline in 
an early December visit to Kazakhstan. Meanwhil
e, Moscow, as a major arms supplier to Iran, is well positioned to push Tehran to ease 
tensions with Azerbaijan in the Caspian, where the two countries have fought over 
borders and oil rights. This geopolitical fault line
 seems to be healing fast.

By Paul Starobin in Moscow

Copyright 2000-2001, by The McGraw-Hill Companies Inc. All rights
reserved.
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