U.S. Barrels Into Oil Pipeline Debate in Support of Turkey

Just a few hundred miles from Iraq’s northern frontier, far from the media glare and rumors of war, the United States has waded into another high-stakes standoff.

The drama is playing out not in the Persian Gulf but in the Caspian Sea basin, a region some experts believe could become the world’s second-largest source of energy, behind only the gulf itself.

At first glance the stakes appear modest: choosing the best route for a pipeline that will carry crude oil from the landlocked Caspian to the open sea and world markets beyond.

But U.S. officials insist that the decision, which will be discussed Friday at a meeting of the 12 participants in a Caspian Sea oil consortium, could shape the political destiny of the entire region.

One route--strongly favored by the U.S. government--runs west from Baku, the Azerbaijani capital, through northern Azerbaijan and southern Georgia and then across much of eastern and central Turkey before reaching the Mediterranean Sea at the southern Turkish port of Ceyhan.

The Clinton administration believes this 900-mile route would secure Turkey’s role as a major player in the Caspian region. That, in turn, would boost the status of a loyal NATO ally and Islamic nation whose secular, moderate government could serve as a model for wobbly, post-Soviet states such as Georgia, Azerbaijan and Turkmenistan.

A prominent role for Turkey also would give the United States a reliable partner in a region where such alliances are rare.

A second route--favored by most consortium members--is far shorter and cheaper. However, it bypasses Turkey, running northwest from Baku to the Georgian Black Sea port of Supsa, well within reach of potential Russian intrigue.

U.S. diplomatic efforts to keep Tehran out of the Caspian oil boom appear to preclude another route to the open sea, south through Iran to the Persian Gulf.

The stakes are potentially enormous for Turkey. Its long-standing role as the anchor of the North Atlantic Treaty Organization’s southeastern flank has diminished since the collapse of the Soviet Union, and its vision of reasserting political, economic and cultural sway over a vast Turkic world to the east has so far failed to materialize.

Ankara views control over the Caspian pipeline as a potential political windfall--another shot at genuine regional power.

The pipeline drama has unfolded in the best tradition of the centuries-old imperial jostling for power and influence in western Asia that English writer Rudyard Kipling once labeled the “Great Game.”

The United States--and Turkey--are using all the leverage they can muster to bend the decision their way.

The administration’s objective is not only to boost the stature of Turkey but also to check the influence of the region’s two biggest powers: Russia and Iran.

Even so, the most vehement opponents of the longer route are not officials in Moscow or Tehran. They are the Western oil companies participating in the consortium, which would spend an estimated $2.5 billion to $4 billion to build it. The 12 members of the Azerbaijani International Operating Co., or AIOC, include four U.S.-based oil giants: Exxon, Amoco, Pennzoil and Unocal.

Turkey Encouraged to Provide Incentives

The United States is leaning heavily on Turkey to come up with subsidies, tax breaks and other incentives to make the longer, costlier route easier for the oil companies to swallow.

In the process, the administration has repudiated the message it has consistently stressed during nearly six years of dealing with developing regions: Let the free market reign.

In a twist, Moscow is now the leading advocate of a market-based decision. In addition to the strategic benefits of the Supsa route, the Russian-owned oil company Lukoil is participating in the AIOC consortium.

“Everything should be decided primarily on commercial feasibility of the routes and the benefits they may offer to the investors,” said Vladimir O. Rakhmanin, spokesman for Russia’s Foreign Ministry.

Not so, senior U.S. officials say. They insist that the stakes in the Caspian region are simply too high to base the pipeline decision on its commercial merits alone.

“You can’t look at commercial realities in a vacuum,” said Richard Morningstar, a senior U.S. diplomat who serves as special advisor to President Clinton and Secretary of State Madeleine Albright for Caspian basin energy diplomacy.

In an interview, Morningstar argued that the United States’ geopolitical interests make the longer Baku-Ceyhan route a necessity.

“It would help to establish a framework within the region . . . that would help ensure the sovereignty and the independence of these countries,” he said.

Feeder pipelines could bring oil, and eventually natural gas, from Turkmenistan and parts of Kazakhstan along the Baku-Ceyhan route, enhancing political stability and providing more volume to reduce costs.

If the prospect of greater stability is not enough to convince the oil companies that they should pay the higher price tag, Morningstar made clear, the United States has a second, potentially more persuasive card to play: the environment.

Supertankers loading Caspian oil at Supsa would have to pass through the narrow, difficult-to-navigate Bosporus Straits on their way to global markets. The route cuts through the densely populated sprawl of Turkey’s largest city, Istanbul.

In Morningstar’s view, the implications of an environmental catastrophe there are so great that they effectively preclude the Baku-Supsa route as an option.

“Unattainable,” he said, referring to the Baku-Supsa line. “So the issue isn’t to compare [the two routes], the issue is to assure that Baku-Ceyhan is commercially viable. There are commercial difficulties that have to be dealt with, but they should be negotiated with the government of Turkey.”

So far, oil company executives say the Turks have been quicker to issue threats than to offer concessions. Turkey imposed tighter restrictions on tanker traffic, warning that it would not permit the Bosporus to become a de facto Caspian pipeline and threatening a Turkish boycott of AIOC companies.

“We feel like we’re unfairly on the spot,” one senior oil industry executive complained. “We can’t do things that don’t make sense for the shareholders, but we don’t want to make trouble in the Bosporus either.”

“We’ve seen the Amoco Cadiz and Exxon Valdez,” he said, referring to two infamous oil spills. “We know what that’s like.”

With pressure for a decision mounting, oil company executives say the government of Turkey has begun negotiating seriously only in recent weeks.

“They’ve come up with ideas, and we’re studying them,” another executive said.

Ankara Official Cites Progress in Talks

Senior Turkish officials are more sanguine.

“In October, they came to us with their own plan, and I’m pleased to say we have come a long way toward satisfying their demands,” said Turkish Undersecretary for Energy Yurdakul Yigitguden. “I can’t be too specific, but we are offering them many tax and other incentives.”

The intensity of the administration’s lobbying campaign has drawn criticism.

Some analysts question the wisdom of a policy they see as trying to divide rather than reconcile the interests of regional powers. Some oil industry officials view it as unwarranted U.S. government meddling.

“What does a pipeline out of the Caspian Sea have to do with the United States government?” asked one industry official, who characterized the administration’s intervention as “unhelpful.”

“There’s only one consortium member ready to say yes” to the Baku-Ceyhan route, the industry official said, referring to TPAO, the Turkish state petroleum company.

“Without exception,” he continued, “all the others would say no, for the simple reason that it makes no commercial sense at all.”

Amberin Zaman in Ankara and Times staff researcher Sergei Loiko in Moscow contributed to this report.