Pipelineistan’s biggest game begins

History may judge it as one of the capital moves of the 21st century’s New Great Game: May 25, the day high-quality Caspian light crude started flowing through the Caucasus toward the Mediterranean in Turkey. The Baku-Tbilisi-Ceyhan pipeline (BTC) – conceived by the US as the ultimate Western escape route from dependence on oil from the Persian Gulf – is finally in business.

This is what Pipelineistan is all about: a supreme law unto itself – untouchable by national sovereignty, serious environmental concerns (expressed both in the Caucasus and in Europe), labor legislation, protests against the World Bank, not to mention mountains 2,700 meters high and 1,500 small rivers. BTC took 10 years of hard work and at least US$4 billion – $3 billion of which is in bank loans. BTC is not merely a pipeline: it is a sovereign state.

This BTC state slices Azerbaijan in half from east to west, then slices Georgia in half almost from east to west, before taking a dip south, bypassing secessionist Ajaria and slicing Turkish Anatolia diagonally from the northeast toward the south. The founding stone is at British Petroleum’s (BP’s) gleaming terminal at Sangachal, half an hour along the Caspian south of Baku. The state is 44 meters wide, snaking 1,767 kilometers across three countries, two of those (Azerbaijan and Georgia) extremely volatile, and the other (Turkey) faces potential trouble from dispossessed Kurds.

The pipeline itself is only 126 centimeters wide, a dizzying steel serpent of no less than 150,000 segments made in Japan, finished in Malaysia and delivered by ship to the Georgian port of Batumi, capital of the separatist micro-republic of Adjaria – which is virtually uncontrolled by Tbilisi.

To understand the scope and ambition of BTC, one must visit Villa Petrolea, the Baku headquarters of BP. The BTC’s major shareholders are BP (30.1%) and the Azerbaijani state oil company SOCAR (25%), followed by Unocal (US, 8.9%), Statoil (Norway, 8.71%), Turkish Petroleum (6.53%), ENI (Italy, 5%), TotalFinaElf (France, 5%), Itochu (Japan, 3.4%), ConocoPhillips (US, 2.5%), Inpex (Japan, 2.5%) and Delta Hess (a joint venture of Saudi Delta Oil with American Amerada, 2.36%).

BP has invested at least $15 billion in the country (exploration, exploitation, pipeline construction). According to Baku’s street wisdom, the man who really rules Azerbaijan is David Woodward, BP’s chairman, known as “the viceroy”, a walking oil atlas with more than three decades working for the company from Scotland to Abu Dhabi and from Alaska to Siberia. Woodward and BP mercilessly spin that BTC is the cleanest and safest pipeline ever built. Georgian peasants and English non-governmental organizations beg to differ.

Dynasty, Caucasus-style

BTC would be impossible without the usual, strategically positioned US-supported dictator – in this case old, ruthless Caucasus hand Heydar Aliyev, who died in December 2003. A dynastic dictatorship is even better, since his son Ilham became the successor in fraudulent elections in October 2003. It also helped that Ilham, a former playboy, happened to be the head of the state oil company, SOCAR. Azerbaijan was never about “liberty and democracy” or color-coded revolutions in the style of Georgia, Ukraine and Kyrgyzstan. Just last Saturday in Baku, Azeri police beat up and arrested more than 100 opposition protesters demanding “Freedom!” and “Free elections!” This is a regime that according to Transparency International ranks 140th out of 146 in the global corruption index. From Washington’s point of view, the Aliyev dynasty in Azerbaijan performs the same role as Islam Karimov in Uzbekistan: they are “our” dictators.

Azerbaijan, Georgia and Turkey were all desperate to finish BTC on time. Turkey owes a fortune to the International Monetary Fund. Georgia survives thanks largely to American handouts. Azerbaijan at least set up a state oil fund to use oil revenues to the benefit of future generations. But very few Azeris believe in the corporate myth that BTC will enrich them. Real life can be found less than a kilometer from downtown Baku: huge families crammed in Soviet-style communal apartments with scarce water and electricity. Azerbaijan could easily be pinned down as a land of rickety Ladas and Volgas crisscrossed by an armada of white BP 4x4s with satellite dishes on top – which allow the headquarters either in London or Baku to immediately locate all “troops” anywhere in the volatile Caucasus. The only other flourishing industry in the Caucasus, apart from oil, is kidnapping. Not to mention Kristina, the top belly-dancer at the Karavanserai, the favorite restaurant of the oil oligarchy, who is in a class by herself.

In Georgia the obstacles were more complex than in Azerbaijan. Thus the “Rose Revolution” of late 2003, getting rid of Edward Shevardnadze to the benefit of young, photogenic, American-educated and American-aligned Mikhail Saakashvili. The small matter of defending BTC from attacks of alleged al-Qaeda-related Chechens holed up in the Georgian mountains remains. But at least protection at the end of BTC in Ceyhan in Turkey is guaranteed: it’s not a coincidence that the pipeline ends right next door to the massive American airbase at Incirlik.

Game not over

In terms of no-holds-barred power politics and oil geopolitics, BTC is the real deal – a key component in the US’s overall strategy of wrestling the Caucasus and Central Asia away from Russia – and bypassing Iranian oil and gas routes. Kazakh President Nursultan Nazarbaev, for instance, has just announced that Kazakh crude will also flow through the BTC before 2010. He even proposed to add Aktau – the Kazakh Caspian oil Mecca – to a new acronym (ABTC?). It’s interesting to remember that BP always denied that it needs Kazakh oil to fill its pipeline.

Everything related to BTC spells tremendous ambition. It will take a few months to fill the pipeline – and for the supertankers at Ceyhan to be loaded with Caspian crude, thus bypassing the highly congested Bosphorus. BTC is projected to reach 1 million barrels a day – roughly 1.2% of global production. Compare it with the 500,000 barrels of the Caspian Pipeline Consortium, which moves crude from Baku to the Russian port of Novorossiysk.

BTC makes little sense in economic terms. Oil experts know that the most cost-effective routes from the Caspian would be south through Iran or north through Russia. But BTC is a designer masterpiece of power politics – from the point of view of Washington and its corporate allies. US Vice President Dick Cheney, already in his previous incarnation as Halliburton chief, has always been a huge cheerleader for the “strategically significant” BTC. The verdict is open on whether this massive investment will be worth it. Instead of the dreams of a new Kuwait, the Caspian may hold only 32 billion barrels of oil – not much more than the reserves of Qatar, a small Gulf producer. The Caspian in fact may hold less than 10% of the total, known Middle East reserves.

Anyway, what really matters is positioning in the New Great Game. The Caucasus, the Caspian and Central Asia are up for grabs. European customers for Azeri (and Kazakh) oil and gas might rely on BTC for some of their supply. But the Russian counterpunch .
http://www.atimes.com/atimes/Central_Asia/GE26Ag01.html

Map showing the route of the oil pipeline that will bring oil directly from the Caspian Sea to Western markets was formally launched in a ceremony attended by presidents and dignitaries