Turkish, Azerbaijani meeting groups discuss Baku-Ceyhan again

Aug 09, 1999 02:00 AM

Members of the Turkish and Azerbaijani working groups set up to co-ordinate policy on the Baku-Ceyhan pipeline met in Ankara recently for further discussions on the oil transport project.
Representatives of the Azerbaijan International Operating Company (AIOC), the consortium that would be the first to use the pipeline, were also expected to attend the meeting.
Details on the talks were sketchy, but Turkish media sources said that the two sides were expected to set a date for the signing of a comprehensive agreement on the project. The Turkish sources also reported that the working groups were expected to reach a final decision on the figure beyond which Ankara would foot the bill for the pipeline.

Earlier this year, Turkish government had, under heavy U.S. pressure, agreed to cover all cost overruns if the price of building the pipeline exceeded $ 2.4 billion. Later on, however, Ankara argued that the minimum price should be raised to $ 2.65-2.70 billion.
Turkey's insistence on a higher minimum figure appears to have irked the Azerbaijani government, which has long professed support for the Baku-Ceyhan project. Natik Aliyev, the president of the State Oil Company of Azerbaijan (SOCAR), said on June 24 that the Turkish government's push to raise the base figure for the cost of constructing a Baku-Ceyhan export pipeline was likely to complicate negotiations on the oil transport project. Aliyev also said on June 23 that Turkey had not backed up its claims with documentary evidence.
Not surprisingly, the two working groups failed in July to wrap up their work and present drafts of the four intergovernmental agreements needed to begin construction of the pipeline by the deadline in July.
SOCAR said late last month that it had not been able to reconcile its position on cost overruns and transit tariffs with that of Turkey. (The Turkish side insisted at last month's meetings that the transit tariff for the oil pipeline be set at $ 21 per metric ton, or about $ 2.88 per barrel. Azerbaijan -- and the Western oil companies working there -- said that the tariff should be, at most, $ 18-19 per metric ton, or about $ 2.47-2.60 per barrel.)
Nevertheless, Azerbaijan's Deputy Prime Minister Abid Sharifov insisted to reporters on August 5 that his country was not at odds with Turkey over the project. He declined to elaborate but said that Baku and Ankara might sign the intergovernmental accords within a month.

Meanwhile, another obstacle to the project has popped up in Washington. Both houses of the U.S. Congress have produced legislation that may link American financial support for Baku-Ceyhan to the settlement of the Armenian-Azerbaijani conflict over Nagorno-Karabakh.
A cease-fire was signed by Yerevan and Baku in 1994, but the two sides have yet to reach an actual peace agreement. Small-scale violations of the cease-fire are fairly common.
In the House, Congressman Robert Andrews of New Jersey recently introduced an amendment expressly forbidding Washington from providing funding for the pipeline pending resolution of the Nagorno-Karabakh conflict. That bill was never presented on the House floor for debate, but similar legislation is due to be discussed in the U.S. Senate soon. The second bill -- SB 1234 -- limits the funds that Washington can make available to Baku for development and construction projects.
The U.S. government's ability to provide Azerbaijan with financial assistance has been hobbled ever since the passage of the Freedom Support Act in 1992. Section 907 prohibits direct U.S. aid to the Azerbaijani government or any of its organs as long as the Nagorno-Karabakh conflict remains unresolved. American oil companies -- and Baku -- have complained repeatedly that the rule impedes progress on Caspian oil projects by blocking access to credits and export guarantees from agencies such as the U.S. Export-Import Bank.
The Baku-Ceyhan pipeline is one of three main export pipeline (MEP) options under consideration by the AIOC, which in late 1997 became the first international consortium to produce oil from Azerbaijan's offshore fields. The consortium has been reluctant to commit to the Baku-Ceyhan option as it is the most expensive of the three under consideration. Turkey -- which through the state-run Turkish Petroleum owns 6.75% of the AIOC -- favours Baku-Ceyhan over the less expensive but no less controversial Baku-Supsa and Baku-Novorossiysk routes.

Source: NewsBase
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