Eurasia Daily Monitor — The Jamestown Foundation
Wednesday, May 10, 2006 — Volume 3, Issue 91
IN THIS ISSUE:
*Moscow presses for better Caspian oil deal
*Abkhazia formulates own solution to conflict with Tbilisi
*Analysts suggest "Camp David" approach to Karabakh resolution
AGREEMENT AT HAND ON OIL TRANSPORT FROM KAZAKHSTAN TO AZERBAIJAN
Following Azerbaijani President Ilham Aliyev’s late April visit to
Washington and U.S. Vice President Richard Cheney’s early May visit to
Kazakhstan, a breakthrough seems imminent on the project to connect
Kazakhstan with the Baku-Tbilisi-Ceyhan (BTC) oil pipeline. Officials in
Kazakhstan now anticipate that Presidents Nursultan Nazarbayev and
Aliyev will sign a framework agreement on that project by late June.
Kazakhstan’s Prime Minister Daniyal Akhmetov and KazMunayGaz Managing
Director for Transport and Infrastructure Karygeldi Kabyldin have just
discussed this issue in Baku with Aliyev and Azerbaijan’s State Oil
Company management. According to officials on both sides, no political
or commercial differences arise between them regarding this project.
Remaining technical issues, such as the mode and schedules of
transportation, can be ironed out in time for the agreement’s signing.
According to these Kazakh officials, oil deliveries into the BTC
pipeline are to originate in the super-giant Kashagan offshore field.
Oil transportation to Baku is to start in late 2008-early 2009 by
tankers. Commercial production at Kashagan is expected to start in 2008
at an annual rate of 7 million tons ("early oil"), rising to 13 million
tons annually by 2010 and reaching 50 million to 60 million tons per
year by 2015. Developed by a consortium of Western companies with
Italy’s Agip as project operator, the field holds estimated recoverable
commercial reserves of at least 1.2 billion tons of oil.
Following his Baku visit, Akhmetov expressed confident hope that the
agreement to be signed by the two presidents would include a pipeline on
the Caspian seabed from Aktau in Kazakhstan to Baku. Thus far, Russia’s
opposition (in tandem with Iran) has intimidated Astana into withholding
its signature on the pipeline project. Cheney’s visit to Kazakhstan
seems to have encouraged Astana that it is Kazakhstan’s national
interests to join the project.
Transport to Baku by tankers, as has been proposed, is only viable as a
short-term option. Once Kashagan comes fully on stream with its massive
volumes, the existing fleet of small-capacity tankers would be neither
sufficient nor cost-effective. On-site construction of medium-capacity
tankers would involve prohibitively high investments, as well as
expensive operations. Moreover, westbound transport solutions other than
by pipeline would only ensure that the lion’s share of Kashagan oil is
ultimately routed toward Russia, as is the bulk of Kazakhstan’s overall
output at present.
According to estimates made in 2004, a trans-Caspian pipeline should
become commercially profitable above an annual volume of 20 million tons
of oil transported. However, oil price dynamics since then and into the
foreseeable future suggest that the profitability threshold has
descended below 20 million tons for a seabed pipeline.
During the Economic Cooperation Organization’s presidential-level summit
just held in Baku, Kazakhstan’s delegation felt that Iran is softening
its opposition to the proposed trans-Caspian pipelines. Astana intends
to explore that issue further with Tehran. In addition, Kazakh officials
are willing to discuss Iranian proposals to expand the existing swap
operations. By this method, Kazakhstan delivers small volumes of oil to
northern Iran by Caspian tankers, while Iran exports oil of equivalent
value from the Persian Gulf on Kazakhstan’s behalf. The oil volumes
swapped by Kazakhstan with Iran have been very small in recent years,
despite Iran’s oft-expressed wish to increase them.
At this juncture, Astana seems to be considering an increase in those
modest volumes as a means to induce Iran to lift its objections to a
trans-Caspian pipeline. With Kazakhstan’s oil output due to grow
spectacularly in the next few years, volumes swapped with Iran would in
any case remain only a small fraction of Kazakhstan’s overall exports.
Meanwhile, Moscow is pressuring Western companies in the Caspian
Pipeline Consortium (CPC), which owns and operates the Tengiz
(Kazakhstan) — Novorossiysk (Russia) pipeline. Those companies depend
on Russia’s consent to expand the pipeline’s capacity of 28 million tons
annually in the first stage to the planned second-stage capacity of 67
million tons annually by the next decade, plus an additional mooring
system for tankers at the port of Novorossiysk.
The Russian government, however, demands "corrections" in its favor to
the 1996 contract, higher transit tariffs, and a high share of
management posts for Russia in CPC, including the Director General’s
post for a nominee of the Russian government. The Western companies
involved are urgently in need of an export outlet for their rapidly
growing output at Tengiz and elsewhere, and therefore are vulnerable to
Moscow’s pressure on the CPC. They seem prepared to accept most of those
conditions because they do not have a trans-Caspian option immediately
available.
(Interfax, Trend, May 5-8)
–Vladimir Socor
ABKHAZIA SLIDES TOWARD RUSSIA, BUT GEORGIA HOLDS ONTO ITS CLAIMS
May 6 marked the second anniversary of the restoration of Georgia’s full
jurisdiction over the Ajarian Autonomous Republic. Georgian President
Mikheil Saakashvili, attending the celebration in Batumi, Ajaria’s main
city, stated that this process "should surely be completed" in breakaway
Abkhazia (TV-Imedi, Regnum, May 6).
Tbilisi likely is encouraged by hopeful messages on separatist movements
from its Western allies. U.S. Vice President Dick Cheney evidently
alluded to Russia during the May 3-4 Vilnius conference on "Common
Vision for a Common Neighborhood" when he said, "No one can justify
actions that undermine the territorial integrity of a neighbor" (see
EDM, May 5). Whether this statement becomes a prelude to more proactive
policies by Georgia’s Western allies regarding Abkhazia and South
Ossetia will likely be clarified at the July G-8 summit, where the
frozen conflicts in the post-Soviet space are likely to be discussed.
Although the Georgian parliament passed a resolution in October 2005
that instructed the government to submit a peace plan on Abkhazia by May
1, 2006, no formal document has been made public. But as early as March
it was apparent that the structure of the Abkhaz plan would be largely
similar to the one designed for South Ossetia — demilitarization and
economic rehabilitation followed by wide autonomy within the Georgian
state.
However, the South Ossetian framework is not reproducible in the more
independence-oriented Abkhazia, which even dared to anger Moscow in
October 2004 by electing a president of its own choice. Predictably,
Abkhaz leaders flatly rejected the peace plan. Sergei Shamba, the
purported Abkhaz foreign minister, said that Abkhazia would not disarm
while Georgia strengthens its military potential and plans to join NATO
(Interfax, March 7).
The Abkhaz establishment has long raised the specter of an imminent
Georgian military invasion to keep the Abkhaz establishment on a
constant state of alert. The separatist government steadfastly claims to
be able to rebuff any aggression from Georgia. "Almost each Abkhaz
household can arm a platoon," boasted Abkhaz "prime minister" Alexander
Ankvab (Vremya novostei, March 6). In an interview with the Abkhaz
newspaper Forum, Anatoly Zaitsev, a Russian lieutenant general serving
as Abkhazia’s chief of the general staff, stated that the Abkhaz army
has the capacity to successfully retaliate against a Georgian military
invasion (Forum, February 17). Abkhaz forces held their third round of
military exercises this year on April 24-27; 5,000 servicemen
participated (Apsnypress, April 25).
With no Georgian peace plan on the table, the Abkhaz separatists have
submitted their own. On May 7, the Abkhaz parliament approved a
"Comprehensive Resolution of the Georgian-Abkhaz Conflict," submitted
three days earlier by Abkhaz "president" Sergei Bagapsh. The parliament
particularly emphasized that the Abkhaz side was the first to propose a
peace plan. The Abkhaz document, "Key to the Future," seeks to the
"development of fundamentally new, neighborly relations" between Georgia
and Abkhazia as two independent states. According to Abkhaz news agency
Apsnypress, the plan proposes confidence-building measures, mutual good
will, ending military rhetoric, and practical implementation of peace
measures. The plan particularly underlines the possibility of conflict
settlement in the framework of regional economic cooperation among the
Black Sea countries (Apsnypress, May 5; Regnum May 6).
Undoubtedly, Abkhazia’s peace plan seeks international recognition, as
Tbilisi will not recognize Abkhazia as an independent state.
The Abkhaz peace initiative resembles the peace plan proposed by South
Ossetia last December, which asked Georgia to consider South Ossetia as
an independent state (EDM, December 15, 2005). Symptomatically, before
proposing the peace plan, Bagapsh had held closed-door talks with Sergei
Baburin, deputy chair of the Russian State Duma, in Sukhumi on May 2. It
appears that both the Abkhazian and Ossetian "peace plans" have been
written in Moscow, which fully controls both separatist regimes.
The Abkhaz separatists reaffirmed their secessionist agenda during a
meeting with a delegation from the NATO parliamentary assembly in
Sukhumi on May 6. Bagapsh noted, "The conversation started smoothly, but
continued in a tense atmosphere." The Abkhaz party leaves "little
opportunities for talks with Georgia," Pier Lelush, head of the
assembly, stated after the talks with the separatists leaders.
Commenting on this statement Shamba said that the Abkhaz leadership has
ruled out both federative and confederative forms of coexistence with
Georgia. Bagapsh stressed that "Abkhazia will develop relations with
Russia whether the international community likes it or not" (rian.ru,
May 7; Apsnypress, Regnum, Interfax, May 6).
Although Bagapsh brushed away allegations of Russia’s annexation of
Abkhazia at the meeting with the NATO delegation, this process
nevertheless is progressing at full speed. About 50 Russian banks now
operate in Abkhazia despite numerous protests by Tbilisi. On May 5,
Bagapsh stated that Abkhazia wants to join Commonwealth of Independent
States, which Georgia plans to leave. He reaffirmed that Abkhazia still
seeks associated membership in the Russian Federation. "The main thing
is to bring Abkhazia closer to Russia politically and economically,"
Bagapsh stressed (Interfax, May 5).
As tensions increase between Georgia and Russia, Georgia’s former
President Eduard Shevardnadze, interviewed by Imedi-TV on May 8, advised
Saakashvili to restrain his anti-Moscow ardor and arrange a meeting with
Russian President Vladimir Putin. Georgia’s territorial integrity will
not be resolved if Russia stays away from this process, he said.
"Improving relations with Russia will facilitate a peaceful solution of
the conflicts in Georgia," he stressed (TV-Imedi, May 8).
–Zaal Anjaparidze
WILL WASHINGTON LEAD THE KARABAKH PEACE PROCESS?
After a failed February attempt to break the deadlock in negotiations
between Armenian President Robert Kocharian and Azerbaijani President
Ilham Aliyev, observers thought the Karabakh peace process was dead. But
following a few quick fixes in the current proposal, international
mediators have come to believe that the peace process is not "dead" but
rather "comatose," and could be revived if only given the "right
medicine."
In the wake of President Aliyev’s successful April 25-28 visit to the
United States, the Azerbaijani press, analysts, and scholars have began
guessing whether Washington could provide the proper prescription for
Karabakh, as it did to negotiate a peace treaty between Egypt and Israel
at Camp David in 1978.
In his speech at the Council on Foreign Relations in Washington on April
26, President Aliyev remarked, "We hope that the current framework of
negotiations will create opportunities for a just [and] long-lasting
peace based on the principles of international law. And of course we
hope that the United States, as a superpower, as a country [which is] a
co-chair of the OSCE Minsk Group, will contribute to the resolution of
[this] conflict" (, April 26).
Commenting on the outcome of President Aliyev’s visit, Novruz Mammadov,
head of the Foreign Relations Department at the Executive Office of the
President, declared that there will be "certain changes in the U.S.
position on the peace talks" and that Washington will make some
"positive steps to resolve the conflict." According to Mammadov, from
now on, the U.S. will "provide Azerbaijan with strategic support in all
areas" (BakuToday.Net, May 2).
While in Washington, President Aliyev also reiterated his previous
statements that the Karabakh conflict could only be resolved within the
framework of Azerbaijan’s territorial integrity, implying that Baku will
reject calls for holding a referendum inside Karabakh.
Baku and Yerevan have already agreed on most of the outstanding issues,
but two remain. One is the timetable to remove Armenian troops from two
occupied regions of Azerbaijan (Kalbajar and Lachin). Second, how will
the parties determine the final status of the Karabakh enclave, which is
by law part of Azerbaijan, but has been controlled by Armenian forces
since 1994?
For more than a decade, Armenia has adeptly managed to defy
international criticism over its occupation of Azerbaijani lands thanks
to existing geopolitical arrangements in the South Caucasus. Neither
Europe, which has been absent in the region until recently, nor the
United States, which has strong Armenian lobbying groups, were seriously
interested in resolving a remote territorial dispute.
But the troublesome situation around the Iranian nuclear program, the
growing importance of Caspian oil and gas for Europe, and the rising
potential that another war will erupt in the region have contributed to
the need for speedy resolution of the Karabakh conflict.
Even Moscow, which as a status quo mediator has kept all three South
Caucasus conflicts in limbo for years, may be willing to be accommodate
the U.S.-supported initiative to resolve the conflict this year.
Russia’s security dilemma in the region has been the major impediment in
its ability to propel Baku and Yerevan forward in the peace process.
Moscow remains concerned that the resolution of this conflict will
diminish Russian influence in the South Caucasus while increasing U.S.
influence. Moreover, Moscow’s unwillingness to pressure its closest ally
in the region (Armenia), while at the same time trying to keep
Azerbaijan on board have raised questions on how far Russia is willing
to push the envelope. Many in Azerbaijan believe that Moscow is
determined to push the resolution process only to a certain level — a
level that is a step short from resolving the Karabakh conflict
permanently.
Nonetheless, Russia came to realize that its desire to maintain the
status quo is backfiring. In fact, during all these years the regional
processes in the South Caucasus have developed in a direction that
Moscow had hoped they would not. Thus, the Kremlin can no longer rely on
its traditional strategy that so long as the Karabakh conflict is
unresolved, Armenia and Azerbaijan will be dependent on Moscow’s active
involvement in regional affairs.
It is clear, however, that without U.S. assurances and international
pressure, Armenia will be reluctant to consider proposals that call for
the resolution of the conflict while preserving Azerbaijan’s territorial
integrity. Baku hopes that Washington could convince Yerevan that the
resolution of the conflict within the framework of territorial integrity
will benefit not only Armenia and Azerbaijan, but also the entire South
Caucasus region. It will allow the parties to open communication links,
engage in regional cooperation, and more importantly begin the
reconciliation process.
Sabine Freizer, Caucasus Project director for the International Crisis
Group, recently indicated, "If the U.S. wants to ensure Azerbaijan’s
long-term support [for U.S.] policies towards Iran, and overall regional
security, [Washington’s] best bet is to first focus on securing a
peaceful resolution of the existing Nagorno-Karabakh conflict"
(Crisisgroup.org). "While the [Karabakh] conflict remains unresolved,
Azerbaijan can ill afford to undermine its improving relations with
Tehran," she added.
Unlike the Key West summit in 2001, where the late Azerbaijani President
Heydar Aliyev and President Kocharian tried to negotiate a peace deal
without a clear framework, today the situation is diffident. The parties
have already agreed on major issues and need one final push. Washington
seems willing to take the lead in facilitating the negotiations and
aiding the parties to reach a historical breakthrough in 2006. Hence, it
could sponsor a new "Camp David Accord" for President Aliyev and
President Kocharian and offer some carrots to both leaders. This would
demonstrate a serious U.S. commitment to stability and security in the
region and help to prevent another war in the South Caucasus.
–Taleh Ziyadov
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