Robert M. Cutler on Energy and Eurasia

This week's column continues the discussion, begun last year, of the Baku-Ceyhan main export pipeline (MEP) accords initialled in Istanbul during the November OSCE summit. Although none of these agreements has yet been published, their outline and some of their details have already been analyzed here from available information. Of the four agreements initialled, previous columns this series looked at the MEP agreement itself and the cost guarantee agreement. As suggested earlier in this series, it turns out that the agreement between the investors and the transit states is complex and still subject to further clarification, as a precondition for establishing the definitive terms of the construction contract itself.

[Note: This article was written after Turkmenistan had agreed to resolve a territorial dispute, before it subsequently reversed that decision.]

The territorial dispute over the Kyapaz/Serdar offshore oilfield that was a major stumbling block to the Baku-Ceyhan Pipeline agreement, no longer is an impediment to Caspian energy development or a barrier to cooperation between Azerbaijan and Turkmenistan. Now, however, a more important question confronts the region. Will Azerbaijan be permitted to put natural gas from its newly proven Shah-Deniz gas-and-condensate field into the Trans-Caspian Gas Pipeline (TCGP) that is planned to bring Turkmenistani gas to Turkey via Azerbaijan and Georgia? This crucial issue may well influence whether, when and how the Baku-Ceyhan Main Export Pipeline (MEP) for Azerbaijani oil is built. In the new scenario, it is possible that negotiations over TCGP implementation will set the logistical precedents for the MEP to follow.

Recent initiatives aimed at fostering a multilateral security system in the South Caucasus potentially represent an historic shift in how Russia relates to the region. These initiatives would lead Russia to view the South Caucasus as an area for common co-operation rather than to treat it as a private preserve. The effectively autonomous province of Ajaria in southwest Georgia, and the Russian military base at its capital Batumi, are auspicious for the political integrity of the Georgian state and for South Caucasus regional stability. The ramifications for Georgia are especially profound. The ongoing [late 1999 and early 2000] fighting in Chechnya has strained relations between Russia and Georgia, as Moscow has repeatedly accused Tbilisi of providing tacit assistance to Chechen separatists. Georgian officials deny the accusations and assert that Russia's "special services" (as distinct from the Russian government itself) have been acting as agents provocateurs.