Books
US Policy and Caspian Pipeline Politics:
The Two Faces of Baku-Ceyhan
by Laurent Ruseckas
Laurent Ruseckas is Associate Director for Caspian Research at Cambridge Energy Research Associates.
Summary
Since 1997 US policy towards the Caspian has effectively shifted from a policy of supporting multiple export pipelines to support for a single project - the Baku-Ceyhan pipeline. This shift is unwise since it encourages polarization in the region between beneficiaries and losers from Baku-Ceyhan. Also, it leaves US geostrategic interests hostage to a decision which is essentially commercial in nature - since it is the oil companies that will have to pay for the pipeline. Now that so much political capital has been vested in the concept of Baku-Ceyhan, however, it will be difficult for the United States to back off from the policy.
* * *
I would like to talk today about the geopolitics of pipelines in the Caspian region, and specifically about US policy toward the pipeline issue as it has evolved over time. My basic argument is that US policy toward the Caspian region has been overly focused on pipelines, and specifically on efforts to ensure the construction of the Baku-Ceyhan pipeline for oil exports from Azerbaijan and Central Asia. This emphasis on Baku-Ceyhan has backfired in two ways.
- First, it has linked American prestige in the region to the outcome of a commercial decision over which the United States government - absent subsidies that are probably not forthcoming - ultimately has limited influence. Baku-Ceyhan may yet emerge as the commercially optimal solution for Caspian oil exports, but such an outcome is still years away. However, the explicit goal of US policy (particularly as the Clinton administration enters its final year) has been to encourage rapid commitment to Baku-Ceyhan. Having staked so much on Baku-Ceyhan, the failure to deliver the pipeline in a timeframe consistent with stated policy goals serves to undermine US influence and credibility in the Caspian region.
- Second, it has contributed to a growing polarization of regional politics. The high profile of the Baku-Ceyhan project and the geopolitical importance attributed to it have helped solidify a strategic alliance among what might be called the "Baku-Ceyhan bloc"(Azerbaijan, Georgia, Turkey, and the United States) and fuel the creation of an opposing bloc consisting of Russia, Iran, and Armenia. This polarization works against long-term regional stability and security, in particular by working against chances of a compromise between Azerbaijan and Armenia on the issue of Nagorno-Karabakh.
Goals of US Policy
The chief stated goal of US policy toward the newly independent countries of the South Caucasus and Central Asia is to encourage their evolution into strong, independent states based on democracy, the rule of law, and market economics. As a basis for policy, this goal is in itself admirable.
This broad goal has both a domestic and a geopolitical component. Domestically, the US seeks to encourage the Caspian states to build democratic institutions, market economies, and the rule of law. These are clearly difficult objectives. In fact, they are achievable only in the long term, and they depend primarily on internal developments over which the influence of any external power is ultimately limited.
Geopolitically, the US seeks to buttress the independence and sovereignty of these new states by supporting them against any external powers that may seek to dominate them.
This objective would appear to be much more achievable than the set of domestic goals mentioned above, particularly given America''s preeminent position in post-Cold-War world. What is more, balance-of-power politics of this sort is still the "natural" stuff of international relations: a pursuit that comes much more naturally to a global power in the late 20th century than does the painstaking process of trying to mould new states suffering from a host of post-Soviet pathologies into law-based market democracies.
It was thus to be expected that the geopolitical component would emerge as the dominant stream of US policy toward the Caspian region. But how exactly would the broad goal of "supporting independence" be translated into policy? At the level of implementation, US policy has inevitably been shaped by two factors: the security needs of the Caspian states as perceived by the states themselves; and by other, perhaps more fundamental American policy interests in the region. From these two drivers has emerged a policy that seeks to constrain Russian and Iranian influence in the Caspian region while supporting Turkey.
- To "support the independence" of the Caspian states boils down to supporting them diplomatically against the one power which many of them see as the primary threat to their independence, that is, Russia. Thus US policy cannot help but be in conflict with Russian goals in the region.
- For historical and strategic reasons, Iran has loomed large over American policy thinking toward the Caspian. Using Caspian policy to help achieve the broader goal of containing and isolating Iran has been a top US priority from the start.
- Support for Turkey is another first-order priority of US foreign policy, particularly given Turkey''s feelings of insecurity and the rejection it has perceived at the hands of the European Union. Supporting Turkish ambitions in the Caucasus and Central Asia has emerged as a low-cost way to show support for Turkey and thus strengthen US-Turkish alignment.Pipeline-driven Polarization
For the first few years of US engagement in Caspian energy, Washington supported the concept of "multiple pipelines" from the region so that no single country would control all export routes. But by mid-1997 it was becoming clear that "multiple pipelines" amounted to no policy at all. The Caspian pipeline derby, like it or not, is to some extent a zero-sum affair, given the reality that the area''s oil reserves are finite. Some pipelines will be built, and others will not. The successor policy which began to emerge in the autumn of 1997 was, instead, support for an "east-west corridor" of oil and gas pipelines from the region - anchored by Baku-Ceyhan.
Given the broad geopolitical goals described above - balancing against Russia, isolating Iran, and supporting Turkey - the proposed Baku-Ceyhan pipeline appeared as something of a magic bullet for Washington. It promised to accomplish the three key geostrategic objectives of US policy: it would prevent Russia from having a monopoly on Caspian oil transit; shut Iran out of the Caspian oil picture; and bolster Turkish influence in the region for the long term.
What is more, Baku-Ceyhan represented a chance for foreign policy on the cheap, in two senses. First of all, the US government would not have to pay for the pipeline; this was assumed to be the task of the oil companies involved in developing Caspian oil. Baku-Ceyhan would also be cheap in terms of political commitment. To lock in its post-Cold-War strategic predominance in Eastern Europe, the US had felt obliged to embark on the massive undertaking and serious commitment of NATO expansion. In the Caspian region, it seemed possible that Washington could achieve a similar result with little more than a pipeline.
Beneath all of this is an unspoken premise - that the routes selected for oil exports from the Caspian would determine the region''s geopolitical orientation. One can debate the extent to which this assumption is true. But perceptions tend to become realities in international politics, and from a very early point all of the actors in the region both within it and without - took it for granted that the routing of pipelines would have a profound geopolitical impact. To be sure, the struggle for power and influence in the Caspian region has taken many forms: military, diplomatic, economic, and cultural. But for whatever reason, pipeline politics has emerged over time as the central playing field for geopolitical competition in the area.
The concept of Baku-Ceyhan became over time the foundation of an increasingly solid geopolitical axis, linking the three states through which the pipeline would pass - Azerbaijan, Georgia, and Turkey - under the aegis of US support. Meanwhile Russia and Iran came to see Baku-Ceyhan as the centerpiece of an American plot to dominate the region and exclude them. Sporadic efforts on the part of the United States to link the resolution of the Nagorno-Karabakh conflict to a variant of Baku-Ceyhan that also incorporated Armenia foundered in the face of understandable Azerbaijani hostility and Armenian suspicion. This left Armenia feeling insecure and clearly excluded from the "Baku-Ceyhan bloc."
Baku-Ceyhan''s Two Faces
This brings me to the title of my presentation: the two faces of Baku-Ceyhan. As I have described, for the states involved in the Caspian region Baku-Ceyhan has evolved into something much more than a pipeline. It has become the symbol of and the mortar for a new geopolitical bloc that consists of Azerbaijan, Georgia, Turkey, and the United States.
At the same time, Baku-Ceyhan remains a pipeline, or rather a prospective pipeline - an expensive piece of infrastructure that, if it is to be built, will be financed not by the various states that have a stake in the "concept of Baku-Ceyhan" but rather by the private sector, and first and foremost by the oil companies that will be shipping oil through the line.
This is the root of the first problem with the US government''s emphasis on Baku-Ceyhan as a policy goal. All the political determination in the world will not get the pipeline built unless - or until - it makes commercial sense from the perspective of the relevant oil companies. The commercial side of the Baku-Ceyhan debate is a complicated one, and I will not engage it here other than to say the following:
- not enough oil has yet been discovered in the Azerbaijani sector of the Caspian Sea to justify the pipeline''s construction;
- new discoveries of oil in the Azerbaijani sector will be slow in coming at best, and there is a risk that they will not come at all if discoveries turn out to contain gas rather than oil; and
- improving the economics of Baku-Ceyhan by shipping Central Asian oil across the Caspian Sea by tanker or pipeline is not likely to be the optimal export solution for oil producers there, meaning that Central Asia will be no more than a marginal source of oil for Baku-Ceyhan.
Of course, substantial subsidies from interested governments could change the picture and make Baku-Ceyhan a more immediately attractive commercial proposition. Thus far, one full-fledged subsidy has been offered - Ankara''s guarantee to build the Turkish segment of the pipeline for a fixed price (which is generally judged to be on the low side). But for its part, the US government has offered only the participation of US government agencies (Eximbank and OPIC) in the financing of the project. This could be helpful at the margins, but it will not amount to a subsidy; indeed these agencies are forbidden by their charters to make loans or guarantees at sub-market rates or conditions.
Thus the emphasis of United States policy on a rapid commitment to Baku-Ceyhan is based on a fundamentally shaky premise. Why, then, cannot Washington simply back off? This is where the other face of Baku-Ceyhan intrudes. Given the project''s importance as the symbol of US commitment to the region, and as part of the mortar holding together the emerging "Baku-Ceyhan" axis, a retreat at this stage would be very difficult, potentially destabilizing, and destructive to American credibility.
So policy continues along its current track. Unwilling to subsidize the project itself, the US has pressured Turkey to take on a substantial amount of financial risk despite its own severe economic problems. Washington continues to encourage Azerbaijan to see the pipeline in political rather than economic terms - potentially to its long-term detriment. Meanwhile Washington has supported Turkey and Azerbaijan in blocking the medium-term expansion of the Baku-Supsa pipeline route, something that is crucial for keeping Azerbaijani oil development on track. Finally, the high profile of the US government vis-Ã -vis Baku-Ceyhan continues to engender strong rhetorical opposition (which could at some point take more tangible forms) on the part of both Russia and Iran.
Is there a solution? Certainly there is no easy answer to the current quandary facing US policy toward the Caspian and the pipeline issue. To a considerable extent, Washington has backed itself into a corner. The best strategy might be a disingenuous declaration of victory followed by a slow, quiet downgrading of Baku-Ceyhan and Caspian pipelines generally as a major focus of policy. This shift could at some point be emphasized by a move to disband the office of the Caspian Coordinator, an unnecessary new layer of bureaucracy which was created in 1997. New pipelines from the Caspian region are urgently needed, and the momentum behind Baku-Ceyhan and other projects will not dissipate if Washington pulls back (even if the noise surrounding them will decrease). And over time, the Baku-Ceyhan pipeline could indeed be constructed - but on the basis of commercial realities rather than American suasion.