AIOC Keeps Quiet As Ankara Warns & Washington Keeps Pressing.

The BP/Amoco-led Azerbaijan International Operating Consortium (AIOC) has decided it will not announce the final route for its 60 million tons/year crude oil pipeline "until it becomes necessary". Under pressure from Ankara and Washington to opt for the Ceyhan route, AIOC was first expected to announce its final choice in October. Because of persistent lobbying by US envoys and Turkish officials, AIOC and Azerbaijan's state-owned NOC Socar agreed to delay the announcement until their meeting on Nov. 12. But the two then decided they should keep quiet, with the Baku government expecting their word in early December. Their decision will be in the form of recommendation and Baku will then give its final say. But Baku does not want to commit itself to a project which is way beyond its financial means.

The Baku-Ceyhan route, on which Turkey and the US are insisting, would cost between $3.5-4 bn, whereas a pipeline to Georgia's Black Sea port of Supsa would cost $1.2 bn or less. AIOC prefers the route to Supsa, the terminal area for a 5m t/y pipeline from Baku which is to be completed in early 1999. AIOC's "early oil" pipeline to Russia's Black Sea port of Novorossiysk started up in early 1997 (see survey of Azerbaijan).

Realising that the Ceyhan route is too expensive and world oil prices are likely to remain low for some time, US officials have begun to say that AIOC's choice of the Supsa route would be a victory for the West as it bypasses both Russia and Iran. But Ankara is strongly lobbying against the choice of Black Sea outlets for Azeri and Central Asian exports. On Nov. 6, Turkey's State Minister in charge of maritime affairs, Burhan Kara, issued this warning:

"Those who want to make the (Bosphorus) straits an oil route should know that we can raise the transit fee five-fold any time. Then they will see what will happen to their dreams of cheap oil... The straits are not international waters, neither are they an oil route and they will never be. Let those who want to sell Caspian oil to the world look for other outlets". He said Turkey was imposing only 20% of the fee set by the 1936 Montreux Convention, which governs the use of the straits by cargo of other countries.

Kara then announced a series of new measures, with immediate effect, to ensure safer transit navigation through Istanbul's Bosphorus and Canakkale's Dardanelles straits: (1) a compulsory passage notification of the Turkish authorities by cargo and military vessels up to 72 hours ahead of the passage depending on cargo type and size of vessel, which will delay cargo transport, with Ankara likely to prolong the period if need be; (2) all vessels which are not on non-stop passages must have a Turkish cruise pilot for their navigation through the straits; (3) vessels should report to the Turkish authorities during their passage; (4) the larger vessels have to report more frequently than the others; and (5) criteria regarding the visibility rules will be regulated anew.

The minister warned that transit cargo of the Black Sea countries will be adversely affected by the new rules if an accident in the straits occurs. "If an accident occurs in the straits, that will cut off the wind pipe of the Black Sea countries, whose foreign trades depend 70% on the waterways". Kara said the straits did not have the technology and physical capacity to handle more oil passage, which reached 60 million tons of crude oil carried by about 5,000 tankers in 1997. AIOC's proposed Supsa route would more than double the volume of crude oils passing through the straits.

Kara's warning and the new measures came on the eve of the Tehran conference.

But on Nov. 9, one day after the conference ended, Turkish Premier Masut Yilmaz broke ground for part of a gas pipeline from Turkmenistan to Europe, to pass through Iran and Turkey, which has been opposed by the US. This was a final section of a 301 km line from Erzurum, near Turkey's border with Iran, to Ankara which is to be completed in 2001. The first 100 km section of the line from Erzurum has already been built. The pipeline to Europe, in which Shell is to be a leading investor, would have a capacity of 30 BCM/year and Turkey is to be one of the main markets for the Turkmen gas.

Iranian Gas Pipeline: Erzurum will become the main junction for the Turkmen gas' pipeline and for a pipeline from Iran to Turkey. The main sections of the latter line on the Iranian side have been built already. Turkey is to begin receiving Iranian gas in April 1999 at the rate of 3 BCM per annum, with the volume to be quadrupled later on, under a 25-year agreement signed in August 1996 and critisised by the US repeatedly since then.

(Turkey's demand for gas is expected to quadruple to 45 BCM/year by 2005 and could reach almost 60 BCM/year by 2020. Botas, Turkey's state-owned pipeline company and gas utility, intends to buy gas also from Kazakhstan and Uzbekistan, with its purchases from Russia to reach 30 BCM/year eventually).

In late October, however, Turkey and Turkmenistan signed an agreement for a 30 BCM/year gas pipeline to be built across the Caspian to Baku and then overland to Turkey and Europe. Strongly backed by the US, this competes directly with Shell's project that should pass through Iran and Turkey. The proposed line across the Caspian would eventually include gas from Kazakhstan and Uzbekistan, with its capacity to reach 50 BCM/year.