YETT Young
Experts’ Think Tank
Cathrine Shandler
The Baku-Ceyhan Pipeline: How
Much is Billions of Barrels Worth?
Table of Contents
Introduction
The United States
Turkey
Russia
Azerbaijan
Corruption and Instability
Environmental and Health
Hazards
Conclusion
Bibliography
Introduction
Two hundred
billion barrels of oil: that is the estimated amount of Azerbaijani oil
reserves in the Caspian Sea. Azerbaijan “noted
for being one of the world’s largest oil producers at the turn of the 20th
century, still has significant oil resources at the turn of the 21st”
(Lubin). A controversial pipeline is proposed to run from the offshore oil
fields of Azerbaijan, to the
port of Ceyhan,
on Turkey’s
southern Mediterranean coast.
In November
1999, the presidents of Turkey, Azerbaijan, Georgia, Turkmenistan, and
Kazakhstan signed the Istanbul Declaration, renewing their commitment to
further the development of Caspian resources, and to the transportation of
those resources to the West, through a “main export pipeline” from Baku to
Ceyhan (Economist, 54), which would bypass both Iran and Russia. Due to
controversy surrounding the Baku-Ceyhan project, it is
still unclear whether or not the pipeline will materialize, for, according to
various sources, there has been no clear commitment to the financing or
security of the pipeline, the two major factors in any transitional project.
The pipeline will cost an estimated US$2.4-3.7billion to put into operation.
Furthermore, although many countries with divergent interests are becoming
involved with the Baku-Ceyhan project, all have considered their potential
financial gain, but as yet, no single party has seriously considered the
potential for increased corruption, environmental disaster, and the impact of
the pipeline on the local population.
The United States
The United States
wants to see the Baku-Ceyhan pipeline take shape. They are “particularly keen
on this project, because it would provide three of the region’s newly
independent states with a source of income and so, it is hoped will drag them
into the West’s orbit” (Economist, 54). Although the US professes to
be interested in the autonomous development of the region’s new, independent
states, it is more interested in its gains from the project, i.e., a new source
of oil. The US is so
supportive of the project because the pipeline, by avoiding Russia and Iran,
will not only diversify the world’s energy supplies, but will also provide a
valuable opportunity for US
trade investment (Lubin).
The US
is ready to pay for oil; it has made substantial financial contributions to Turkey
(Bolukbasi, 92). The US
government is strongly promoting the Baku-Ceyhan proposal, but one domestic
constraining factor is the powerful Greek-American and Armenian-American
contingent, which lobbies against the pipeline that threatens to strengthen
their age-old adversaries, Turkey
and Azerbaijan
(Economist, 54). This is
but one of the concerns hindering the Baku-Ceyhan project.
Turkey
As further noted in the Economist, Turkey is pro
Baku-Ceyhan, and it wants as many pipelines as possible crossing its territory
(Economist, 54). It supports the
transportation of Azerbaijani oil through Turkey because it considers Azerbaijan an
ally in the Transcaucasus. Turkey
supports Azerbaijan’s claims
to Nagorno-Karabakh and, at the same time, wants civil relations with Armenia and Georgia,
in order to reduce Russia’s
power in the Transcaucasus (Bolukbasi, 82). However, the Armenian view over the
situation in Nagorno-Karabakh makes relations between the Armenians and Turks
difficult; the greatest tension between them originated with the Turkish
genocide of Armenians, back in 1915, for which the Turks claim no
responsibility. Consequently, Azerbaijani-Armenian antagonism has led to the
best pipe route, the Baku-Armenia-Ceyhan route, being discarded as an option (Bolukbasi,
93). Relations with Georgia
are less tense, due to there being no historical grievances between the two
countries. Since Turkey
considers Azerbaijan its
closest ally in the region, it wants to help Azerbaijan
develop its oil field, but Russia
sees this as an infringement on its territory.
Russia
Turkish friction with Russia stems from the latter’s
feeling of being ‘left out of the deal’. Russia is utterly opposed to the
Baku-Ceyhan pipeline; its ultimate goal is to stop the project, but it will go
to any lengths to make sure that its oligarchies will benefit from any deals
that are made. Russia’s position was made evident by its successful
attempt to block negotiations by covert political means, in 1993, e.g., by
toppling the Elchibey government in Azerbaijan, when they came too close to
ratifying a development deal with the Azerbaijan International Oil Consortium
(AIOC), a coalition of a number of
western
oil companies and Turkey’s
state oil company, the Turkish Petroleum Joint Stock Company (TPAO). Before any
such deal could be finalized, however, on 18 June 1993,
Elchibey was overthrown in a
military coup…by Colonel Suret Huseynov, widely known to be very close to Moscow. Haidar Aliev
installed himself as president in June 1993, and cancelled the oil
agreement. He then re negotiated the agreement to include Russia in the AIOC, and transferred 10 percent
of Baku’s own shares to Russia in March
1994. (Bolukbasi 87).
Russia and Turkey
have different views when it comes to the future of Azerbaijan. Russia wants to be the sole outlet for
Azerbaijani oil exports (Bolukasi), and is therefore suspicious of Turkey’s dealings with Azerbaijan. It
would clearly prefer Azerbaijan
to be dependent on Russia,
and for the Azerbaijani oil to flow through Russia. Therefore, the Russians are
in favor of the continued use of the existing pipelines that run via the Black
Sea, at Novorossiysk.
As noted in the Economist, the “pipeline to Turkey from Baku would be
child’s play compared with the Russian project, which involves laying the
deepest undersea pipeline in the world through the corrosive sludge of the
Black Sea” (Economist, 54).
Russia’s
pipelines are worn out, and the unpredictability of the country’s politics does
not encourage foreign support for a Russian pipeline.
Azerbaijan
Azerbaijan’s
future is based on oil. Clearly in favor of the Baku-Ceyhan project, the
country would be better able to deliver its resources to the western market,
diverting them away from Russia,
and thus collecting more profit. The nation’s development is contingent on its
oil, but the “original estimates of the region’s oil reserves…as high as 200
billion barrels, are now considered unrealistic” (Lubin). Other sources,
including Bolukbasi, have put the figure at a considerably lower 4 billion
barrels, and have suggested that “the difficulty in extracting and transporting
these resources may limit the potential revenue” (Lubin). Furthermore, relying
too much on energy reserves may be to the detriment of the people of the
Transcaucuses, because, “these countries have increasingly declined into
economic hardship. Coupled with other economic and social pressures that
currently extend throughout the region, potential energy windfalls may only
exacerbate unrest” (Lubin) in the region.
From an external perspective, Central Asian cities
seem to be booming. People seem more prosperous, and there is new construction.
For example, Turkmenistan’s
capital boasts elaborate, buildings and palaces,
but these
images belie a great deal of hardship and strife. Economic pressures and
declining living standards are perhaps the most serious source of tension and
potential instability in Central Asia, both
because of the large, highly visible, and widening gap between rich and poor.
Much of the population lives in poverty and destitution—and ironically, often
without gas or electricity (Lubin).
What Azerbaijan is already beginning to reflect is the
more sobering reality of “waste, crime, economic hardship, environmental
devastation, and potential instability” that may jeopardize the stability of
these countries long before any financial rewards are realized (Lubin).
Corruption and Instability
It is clear that the potential economic fortune to
be had by bringing Azerbaijani oil to market will not go to the vast majority
of the population, most of whom, as already noted,
live with out gas or electricity. Due to a highly organized system of
corruption that has, for decades, characterized countries such as Azerbaijan, it
is reasonable to suggest that the influx of funds into the region will only exacerbate the
situation.
Today,
these “underground economies represent one of the most serious sources of
potential conflict in this, region as economic hardship has grown, the income
gap has widened, and citizens feel increasingly disenfranchised” (Lubin). Since
corruption is already known to be a problem, a reasonable deduction may be that
when oil revenues begin to flow, corruption will become even more entrenched
and difficult to address (Lubin).
Another form of instability lies in the religious,
ethnic, and “tribal divisions in central Asia and the Caucasus”
(Lubin). These factors lead to a bleak situation for the people of Azerbaijan.
Environmental and Health Hazards
Long-term environmental damage caused by drilling
for oil in the Caspian Sea, if not carefully
dealt with, may devastate the local population. Environmental quality is
critical to the health and well being of all inhabitants of a region, but both
the local governments and the Western oil investors have their eyes fixed
firmly on the prize of oil, not the consequences of their actions. The
government of Azerbaijan wants the profits, but it is quite clear that, at
least for the time being, they have neither the resources nor the political
will to address the serious problem of environmental degradation (Lubin). It is logical to surmise from this
that in the future, when the environment is totally devastated, it will be too
late to save the lives and habitat of the indigenous peoples.
Many cases in history, such as the Love Canal,
have proven that ordinary people must reap the negative consequences of a
contaminated environment, particularly with respect to health issues. Due to
the complete lack of environmental protection in the area now, the Baku-Ceyhan
project will only add to the environmental devastation of the area. Everyone
seems to be willing to pay for the oil that will flow from the region, but who will
clean up the mess? The lack of concern shown by neighboring countries, i.e., to
prevent environmentally hazardous disasters, has been proven by the Chernobyl
catastrophe; the fact that “about one Russian in five suffers from cancer in
one form or another” (McMauley, 213), and that cases of cardiovascular disease
and malignant tumors are increasing, only serves to reiterate the warning that
environmental damage has severe, long-term, negative effects on the population.
Conclusion
Clearly, there are major geopolitical aspirations
and machinations behind the Baku-Ceyhan pipeline. Many factors add to the
speculation of whether this project will ever come to fruition. The US, Turkey, and Azerbaijan
are in favor of it, while Russia,
its own self-interests in mind, is utterly opposed to the plan. It remains to
be seen whether the energy reserves will lead to prosperity for the people of Central Asia, or will simply line the pockets of the oil
companies and the Mafia.
The politics surrounding the proposal will indefinitely
delay its implementation, and domestic concerns, such as the health and safety
of the population are destined to be neglected, in deference to potential
financial gain. Yes, money is needed in the region, where poverty is on a par
with that of Africa, but it has been shown
that money seldom reaches those who most need it, and, in some cases, the basic
comforts of electricity, gas, and running water, are deemed luxuries, if
present at all. We must question if the West’s acquisition of a little more oil
is truly worth the expected escalation of corruption and the devastation of the
Azerbaijani environment.
The stability, or rather
instability, of the region is also a major factor. Increased corruption is just
one of the many concerns that will come to plague the people of Azerbaijan if
the pipeline is built, and yet, it is clearly the case that further corruption
would not benefit the people, or improve their current living standards. On the
contrary, any increase in corruption will certainly reduce the quality of
living for the general population, so the conclusion must be that it is not
a good idea for the Baku-Ceyhan pipeline to be built, without first dealing
with the factors that create instability and corruption.
Although the first
estimate of the size of the oil reserves in Azerbaijan was 200 billion barrels,
it is now believed to be closer to 4 billion barrels, and this relatively
insubstantial cache may not be worth the potential negative environmental or
health hazards. The future impact of the Baku-Ceyhan pipeline on the indigenous
population is potentially grave, yet the desperate need for money, not to
mention the support of the US and Europe, may just tip the scales in favor of
construction.
Bibliography
Bolukbasi,
Suha. “Ankara’s
Baku-Centered Transcaucasia Policy: Has It Failed?” Middle
East Journal. 51 (1997): 81-94.
Lubin, Nancy. “Pipe
Dreams.” Harvard International Review. 22.1 (2000). Academic
Search Elite. 15 March 2003.
<http://search.epnet.com/direct.asp?an=28519&
Db=afh>.
McCauley,
Martin. Bandits, Gangsters and the Mafia: Russia,
The Baltic States and
the
CIS since 1992. London: Pearson Education, 2001.
“Of Politics and Pipelines.” Economist. 352.8127
(1999): 54-55.
Rasizade,
Alec. “The Bush Administration and the Caspian Oil Pipeline.”
Contemporary
Review.
150.51881 (2001): 21-26.
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http://wm2.uvic.ca/MBX/cathrine/ATT:IMAP:216/2/Quotations.doc
http://wm2.uvic.ca/MBX/cathrine/ATT:IMAP:205/1/BAKU-CEYHAN.doc
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