Dagestan conflict leaves Azerbaijan with fewer options

Aug 16, 1999 02:00 AM

by Jennifer DeLay

Azerbaijani officials have never been happy about the fact that a significant portion of the country's most precious natural resource -- oil -- must be exported through Russia.
Hence the rejoicing earlier this year when the Azerbaijan International Operating Company (AIOC) completed the Baku-Supsa pipeline, a westward-leading, non-Russian oil export outlet.
The new pipeline through Georgia began to look even better this summer as oil flows through the benighted northward line from Baku to Novorossiysk finally dried up after a long series of interruptions and incidents in and near Chechnya. The Russian side tried to keep Azerbaijani oil flowing to Novorossiysk even after Baku-Novorossiysk was shut down, opening up a rail corridor for crude exports through the republic of Dagestan. But the Azerbaijanis and the AIOC have sniffed at Transneft's efforts, dropping hints about plans to expand Baku-Supsa and export all oil through Georgia.
One of the reasons that the Azerbaijaniside has been able to express reservations about the Russian export option over the past few years is that it was reasonably certain that alternative routes -- such as Baku-Supsa -- would be opened up. However, absence may make the heart grow fonder. The Baku-Novorossiysk pipeline has been closed and will probably not come back on line for some time -- especially now that Chechnya has become embroiled in the conflict in neighbouring Dagestan. That same conflict, meanwhile, has closed off the rail corridor for oil shipments through Dagestan.
In other words, even though Azerbaijan never liked the idea of sending its oil to Novorossiysk, Russia's busiest oil terminal and main Black Sea port, it no longer has the option of doing so. The Baku-Supsa pipeline -- built to serve as the favoured alternative route for early oil exports -- is now the only existing conduit for Azerbaijani crude.
This is not a good position for Azerbaijan to be in. The country's economy depends on the oil industry, and the oil industry in turn depends on export outlets. As long as only one export outlet is functioning, Azerbaijan's fate depends on what happens in the countries through which its export outlet crosses. If, for example, the turmoil now racking Dagestan and other parts of the northern Caucasus moves south into Georgia -- which, like Dagestan, has plenty of reasons to fear ethnic strife -- Azerbaijan would effectively lose the Baku-Supsa pipeline. Without the pipeline, no exports; and without exports, no money -- and no chance of becoming a centre of the world oil industry.
It would hardly be surprising, then, if officials in Azerbaijan start looking to maximise their options and minimise their dependence on the one export pipeline left to the country. They would have only two options: a modified westward route through Armenia and a southward route through Iran.
It is unlikely that an Armenian option will be pursued at this time. Mistrust between Baku and Yerevan still runs deep, and -- perhaps more importantly --Armenia cannot offer access to the open sea. It can only offer a shorter route to Turkey, which Baku appears to view as a better transit country for the AIOC's main oil -- production of which will not begin for some years yet -- than for early oil.
Moreover, Azerbaijani officials still bristle at the mere suggestion that Armenia might somehow be involved in the transport of main oil. On August 9, for example, Azerbaijani President Heidar Aliyev's top foreign policy aide Vafa Guluzade accused Yerevan of spreading rumours about a possible change in the route of the planned Baku-Ceyhan main export pipeline (MEP).
The Iranian option is likely to prove more attractive. Tehran has said repeatedly that it can offer Caspian producers good terms and easy access (under swap deals) to the Persian Gulf, a major centre of the world oil trade. Under the current circumstances, this may be enough to convince Baku to brave Washington's certain indignation at any suggestion of an Iranian export deal -- and also ignore recent bouts of civil unrest in Iran.
The problem with both of these options, however, is that they will take time to set up. (An Armenian export corridor would be especially difficult to arrange, given that Armenia can hardly boast of an extensive pipeline network like that of Iran.) The Russian route, by contrast, could -- assuming the cessation of all armed conflict and an effective crackdown on pipeline thievery in Chechnya -- probably be opened up more a bit more quickly. And this may be enough to make an official or two in Baku long for the resumption of deliveries to Novorossiysk.

Source: NewsBase
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