Robert M. Cutler on Energy and Eurasia

This week’s commentary continues the analysis begun last week, of the terms and prospects for agreement on construction of the Baku-Ceyhan main export pipeline (MEP). The column last week discussed two of the four agreements being negotiated: the MEP agreement itself and the cost guarantee agreement. This week, I begin discussion of the prospective agreement between investors and transit states.

Part one of this series, published after BP-Amoco made an announcement in support of the Baku-Ceyhan Main Export Pipeline (MEP), reviewed the background to that decision and its implications with regard to the four agreements being negotiated between Turkey and Azerbaijan. It also discussed what the MEP agreement and the cost guarantee agreement might look like. Part two began the discussion of the agreement between investors and transit states. This week's column is being written on the weekend preceding the November 18-19 meeting of the Organization for Security and Cooperation in Europe (OSCE) in Istanbul. It is expected that a set of framework agreements will be signed at that meeting, at least by Turkey and Azerbaijan. In anticipation of that event, the discussion of the agreement between investors and transit states will continue here, with special attention to Georgia. First, however, will come a few necessary preliminary remarks about BP-Amoco and the Istanbul conference.

The signing of the Istanbul Protocol on the Baku-Ceyhan pipeline at the recent OSCE meeting was highly important politically to the leaders who signed it. But the project will in the long run be more important to the peoples of the region than to those leaders who expended so much effort bringing it about. The pipeline deal presents regional leaders with a fateful decision. Should they fail to use local suppliers and train local labor for its construction, current disparities in income distribution will become aggravated. This could create civil unrest, leading to political instability that would threaten the pipeline project itself. But by using local NGOs to train a capable workforce, individual workers would experience the decision-making autonomy necessary to foster democratic institutions, build civil society, and perhaps also lead to civil unrest.