US Efforts Diversify Oil Supplies

Dating back to 1994, the US government, along with a consortium of British, American and European oil concerns, put forward an ambitious project to build an oil pipeline that would span over 1,040 miles (1,770 km) and link the Caspian Sea to the Mediterranean Sea from Azerbaijan through Georgia on to Turkey.  What is crucial about the pipeline is threefold:

1. It will increase production from 300,000 barrels per day (bbl/d) to 1,000,000 bbl/d by 2008 from Azerbaijan, or 1% of the world's oil supply
2. It doesn't flow through the volatile Middle East or the democratically regressing Russia, while enriching two important states in Russia's "near abroad".
3. The world will benefit from the increase in world oil supplies.

President Ahmet Necdet Sezer of Turkey, President Mikhail Saakashvili of Georgia, US Energy Secretary Samuel W. Bodman, President Ilham Aliyev of Azerbaijan were joined by Lord Browne, the chief executive UK BP for the opening of the pipeline yesterday.

Azerbaijan went into an economic decline after the breakup of the Soviet Union with a GDP that contracted 60% in the first half of the 1990s.  With a current GDP of roughly $30 billion in Azerbaijan, the oil pipeline, which cost over $3.6 billion to build, will contribute a substantial gain to the country's fortunes and help bring stability to a former Soviet state while increasing Georgia's wealth as well.  The country has somewhere between 7 to 17 billion barrels of potential oil reserves, and the pipeline has the capacity to move 10 bbl/d of high quality crude oil.

US diplomatic support to Azerbaijan as noted on the State Department's website reveals:

"The United States has been actively engaged in international efforts to find a peaceful solution to the Nagorno-Karabakh conflict. The U.S. has played a leading role in the Minsk Group, which was created in 1992 by the Conference on Security and Cooperation in Europe--now the OSCE--to encourage a peaceful, negotiated resolution to the conflict between Azerbaijan and Armenia. In early 1997, the U.S. heightened its role by becoming a Co-Chair, along with Russia and France, of the Minsk Group.

The U.S. supports American investment in Azerbaijan. U.S. companies are involved in three offshore oil development projects with Azerbaijan, and U.S. companies in other fields such as telecommunications have been exploring the emerging investment opportunities in Azerbaijan.

The United States is committed to aiding Azerbaijan in its transition to democracy and formation of an open market economy."

The US is actively involved in solving ethnic and border disputes, promoting long-term stable economic investment and economic development to ultimately produce a more stable democratic nation that is over 90% Muslim. 

Such diplomatic and capitalist triumphs are important to take note of for they demonstrate models of constructive multi-country engagement and economic improvement that support long-term democratic change.

Note: An excellent source of maps, oil and economic information on the pipeline can be found from the US Department of Energy (DOE) here.

UPDATE: The Economist has an article worth reviewing on the pipeline out today.  One of its key quotes:

"The BTC pipeline, though the most expensive option for exporting Caspian oil, was backed by America because it avoided Russia, thereby reducing the dependence of the Caucasus and Central Asia on Russian pipelines. The pipeline also provided an opportunity to bolster regional economies that the West is courting, especially those of Georgia, Azerbaijan and Turkey, a NATO ally, and build support for America in the region. Georgia’s location gives it a 'strategic importance far beyond its size', according to America’s State Department.

Upgrading an alternative route through Georgia to Supsa on the Black Sea would have made for a far shorter (and cheaper) pipeline. But Turkey complained that it would lead to an unsustainable level of shipping passing through the Bosporus Strait that bisects Istanbul. At Washington’s urging, the BTC pipeline wended its complex way through Azerbaijan, Georgia and Turkey."

(May 27, 2005)

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