Oil companies withhold agreement from Caucasus pipeline project

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DESPITE YEARS of pressure from Washington, plans to build a strategic oil pipeline across the Caucasus from Azerbaijan to Turkey remain deadlocked.

At the summit in Istanbul last week, the United States trumpeted a deal on the line as a great triumph. "These agreements are truly historic," said President Bill Clinton. "They will advance the prosperity and security of a region critical to the world."

But commercial agreements behind the line are a long way from resolution. BP Amoco, the main oil company in the region, is sceptical of the plan, and an attempt to get agreement between corporations involved in the deal has failed. The dispute is part of a struggle for commercial, political and strategic advantage in Central Asia and the Caucasus. America, Turkey, Russia and Iran are the central actors, though Britain has an influential role through its oil companies.

The problem centres on the oilfields of Azerbaijan, a country in the Caucasus that was part of the Soviet Union. It has no access to the sea, so oil must be exported by pipeline. America and Turkey have argued that oil must go to Ceyhan, on the Turkish Mediterranean coast. The oil companies in Azerbaijan have preferred a cheaper route to Supsa, in Georgia, on the Black Sea.

Turkey says this would have an environmental cost, but the real argument is political: Washington and Ankara want to retain control of a strategic East-West transportation corridor, keeping countries in the region and the oil away from the influence of Russia or Iran. BP is the leading company in the 11-member Azerbaijan International Operating Company, the biggest foreign investor in the sector. It has resisted the Ceyhan route, saying it made no commercial sense.

The company has come under strong pressure from the US, which has appointed a diplomat, John Wolf, to represent it in negotiations.

The British Government thinks the decision should be made on a commercial basis. It is also less concerned than the US about Iran's role in the region. BP seemed to shift its ground last month but its actual position is that it will back the pipeline from Baku to a point where it could go to Turkey or Georgia, and that a decision must then be made whether it is a commercial venture, in which case it can find normal commercial backing, or a strategic route, in which governments must help.