Oil pipeline deal bypasses Russia

TWO IMPORTANT pieces of the Caspian energy jigsaw fell into place yesterday with outline agreements for a new oil pipeline linking Azerbaijan's capital, Baku, to Turkey's Mediterranean coast, and for a gas pipeline under the Caspian Sea from Turkmenistan to Baku.

The deals, formally witnessed by US President Bill Clinton and signed during the summit of the Organisation for Security and Co-operation in Europe, have one key characteristic in common: they both bypass Russia, and could reduce Moscow's ability to shape events in the southern Caucasus, a region it has historically considered its backyard.

The $2.4bn pipeline deal, signed by the presidents of Azerbaijan, Georgia, Turkey and Kazakhstan, calls for the project to be completed by 2004, enabling one million barrels a day of oil from the Caspian area to be sent directly to the Turkish port of Ceyhan. Crucial to yesterday's signature was the involvement of Kazakhstan, which has agreed to pump 20 million tonnes of its oil per year through the pipeline.

This will help allay fears that the scheme, for all its political attractions to the West, will not be viable in economic terms. Even with the addition of Kazakh oil, and Turkey's commitment to start basic engineering work, some experts still doubt that the Baku-Ceyhan link will be completed, at least according to schedule.

The second agreement should see some 16 billion cubic metres of natural gas from the huge reserves of Turkmenistan flowing to the fast-growing Turkish market every year. The Transcaspian project, costing $2bn (pounds 1.2bn), should be ready within three years, again avoiding Russian involvement.

The two agreements are a serious setback for Moscow's territorial ambitions, and a success for the United States - cementing the position of Turkey, its key ally in the region, and reducing the amount of Turkmen gas and oil exported across Iran.