Robert M. Cutler on Energy and Eurasia

Press reports have indicated that what separates the United States and Turkey in their negotiations [over conditions for American access to Turkish territory and facilities for military action against Iraq in 2003] the size and nature of the economic package wanted by Ankara. This is partly true, but it is not the whole story, and not even necessarily the most important part of the story. Military aspects of any Turkish incursion into northern Iraq and political aspects of northern Iraq's future are, rather, the more significant sticking points. Before discussing the latter, it is nevertheless useful background to review how the level of the economic package has recently increased.

Late last year, the flagship venture TengizChevrOil took the unusual step of holding its board meeting in Almaty and voting to suspend the next stage (planned at $3 billion) in the project’s development. A number of explanations filtered out over subsequent weeks to explain the decision, although all the explanations turned on the issue of the level of TengizChevrOil's taxes. A more disturbing explanation later emerged, that KazMunaiGaz, the Kazakhstani partner in TengizChevrOil, had put forward a bureaucratic stategem that amounted to making ChevronTexaco to pay its portion of the cost.