Violence clouds launch of major US-backed Caspian oil pipeline

AFX Europe (Focus)
May 23, 2005

BAKU (AFX) – The planned launch this Wednesday of the 4 bln usd
Baku-Tbilisi-Ceyhan pipeline, a major US-backed global energy
initiative, has been clouded by a recent violent crackdown on the
opposition in Azerbaijan.

British oil giant BP holds a 30 pct stake in the consortium running
the pipeline. Other consortium members include Azerbaijan’s state oil
company SOCAR, Amerada Hess, ConocoPhillips, Eni, Inpex, Itochu,
Statoil, TPAO and Unocal.

A huge 11-year-long undertaking, the pipeline will transform the
Caucasus and Turkey into an energy bridge between the Caspian and the
rest of the world when it is fully operational six months from now.

But much of the gleam of that accomplishment was worn away over the
past week by Azerbaijan when police badly beat and arrested scores of
people attending a peaceful rally on Saturday as part of a wider
crackdown linked to the pipeline’s opening.

Authorities refused to allow the rally, saying that it fell too close
to the opening ceremony on Wednesday, which US Secretary of State
Condoleezza Rice and a host of other foreign dignitaries were due to
attend.

Police rounded up some 30 opposition members ahead of the protest in
what the opposition alleged was an attempt to derail the rally and
arrested another 45 during the rally itself as they doled out severe
beatings to dozens of pro-democracy protestors.

David Woodward, chief executive of BP’s Azerbaijan division,
criticized the violence and voiced skepticism on the government’s
stated rationale for the crackdown.

“It’s very unfortunate,” Woodward told Agence France-Presse, referring
to the weekend violence. “I find it rather surprising that they should
feel the need to ban a small gathering like that essentially well
before any of the VIPs arrive.”

The crackdown was widely criticized by the West, with Norway’s
ambassador to Baku, Steinar Gil, saying some guests expected at the
opening ceremony may find it embarrassing to take part while
opposition activists remain in detention.

The 1,770 km-long pipeline, which will ship up to a million barrels of
Caspian oil to the Mediterranean daily, was built with financial
support from the US.

It was initiated in 1994 as part of Azerbaijan’s so-called “deal of
the century” — a massive oil contract signed in the early 1990s to
develop Caspian Sea oil.

The US hopes transporting oil from this region will reduce its
dependence on fuel from the volatile Middle East. At the same time the
project has loosened Moscow’s grip here and bolstered US influence in
the region.

For Azerbaijan, wracked by corruption and poverty, the project has
been a useful political tool with officials lauding it as the answer
to all of the country’s financial problems.

But the crackdown on the opposition has highlighted concerns that the
awaited benefits, an estimated 40-60 bln usd in oil revenues in the
next 30 years, will not trickle down to the general population in an
atmosphere of general unaccountability.

SOCAR, which holds a 25 pct stake in the BP-led pipeline consortium,
refused to comment on concerns that a high level of opacity in the
company could hamper public accountability to the project.

“There is little transparency in the oil industry and a lot of
corruption in society, and that’s a very bad combination,” said
Ingilab Ahmedov of Baku’s Public Finance Monitoring Center.

According to BP’s Woodward, the government is trying to deal with the
issue. But he said “the old guard,” or officials who have remained in
power since the death in 2003 of the president, Heydar Aliyev, “don’t
want to see reforms progress… and wish to pursue their own personal
interests.”

Internationally, too, critics have said that the West and especially
the US have been too soft on Azerbaijan in their quest to secure oil
supplies.

“There is a huge reluctance to make a stink of what’s inexcusable and
most of that is to do with wanting to maintain the security of
supply,” said Simon Taylor, a director at Global Witness, the
London-based watchdog focused on corruption in resource-rich states.