Foreign Policy Briefing No. 63

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

By Stanley Kober
October 31, 2000

Executive Summary

One of the top foreign policy priorities of the Clinton administration during the last few years has been strong support for building a pipeline to transport oil from Baku, Azerbaijan, to the Turkish port of Ceyhan. The administration has argued that this pipeline, bypassing other routes going through Russia and Iran, would be the best way for the economically struggling countries of Central Asia to get their energy exports to market, thereby underpinning their newly won independence. Washington also stresses the supposed benefit of having the pipeline run through the territory of a NATO ally, Turkey.

The project is fraught with problems, however. The first is the price of oil. Although the price has increased recently, the overall trend since the oil crises of two decades ago has been down, as a result of the relentless pressure of technological advancements. The lower the price of oil, the more questionable the commercial viability of the expensive Baku-Ceyhan pipeline. The governments of the United States and Turkey are already being pressured to subsidize construction.

The second problem is political. The effort to bypass Russia makes the United States appear hypocritical. Administration officials are arguing that Russia should move to a market economy while Washington asserts the superiority of U.S. strategic interests in selecting pipeline routes. 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. Similarly, the effort to bypass Iran is creating an obstacle to efforts to reach out to the elements in that country who want better relations with the United States. Thus, the pipeline, far from promoting U.S. interests in the region, undermines them. The U.S. government should heed its own rhetoric and let the market determine the pipeline route.

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Stanley Kober is a research fellow in foreign policy studies at the Cato Institute.