News Release

October 31, 2000

Conflict over oil pipeline is no "007" fantasy
U.S. support for Baku-Ceyhan route is strategic and economic disaster, study says

WASHINGTON-In the latest James Bond film, a terrorist tries to blow up Istanbul to put a competing oil pipeline out of business. But sometimes fact is as strange as fiction. Washington's insistence on building an oil pipeline from Baku in Azerbaijan to the Mediterranean Turkish port of Ceyhan is dragging the United States into a political conflict and an economic sinkhole, says a new Cato Institute study.

In "The Great Game, Round 2: Washington's Misguided Support for the Baku-Ceyhan Oil Pipeline," Cato research fellow Stanley Kober shows how President Clinton's support for this particular pipeline route is causing huge tensions with Russia and Iran. The administration has argued that the pipeline would promote economic and political stability in Central Asia and benefit Turkey, a strategic NATO ally. But "U.S-Russian tensions, which are already disturbingly high, are being exacerbated by the pipeline issue, because Moscow suspects that Washington is trying to establish a U.S. sphere of influence on Russia's southern flank," Kober says.

Russians are already suspicious that the Chechnya insurgency has been inspired by foreign interests seeking to make the existing pipeline through Chechnya and Russia appear unreliable, Kober points out. Washington's insistence on the Baku-Ceyhan route has done nothing to ease those suspicions, Kober argues. "When we tell the Russians, in effect, that we believe in market economics except when our strategic interests are more important, what are they supposed to think?" he asks.

U.S. pipeline preferences may be making Russia nervous, but they also isolate Iran at a time when that country is breaking down the wall of mistrust between itself and the United States. "The rewards of an improved relationship, putting to rest two decades of hostility, are too great to jeopardize for a pipeline route that is difficult to justify commercially," Kober writes.

Getting oil from the Caspian to a seaport is expensive no matter which route is chosen, Kober says. To make Caspian oil commercially viable would require high oil prices or huge cost reductions, he argues. The alternative is huge subsidies-something the oil companies have already requested of Turkey and could request of the United States.

"The pipeline, far from promoting U.S. interests in the region, undermines them," concludes Kober. "The U.S. government should heed its own rhetoric and let the market determine the pipeline route."

"The Great Game, Round 2: Washington's Misguided Support for the Baku-Ceyhan Oil Pipeline"

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