THE IRANIAN
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Pledges Oil Funds For Caspian Sea Region
By HUGH POPE
The Wall Street Journal
June 1, 1998 U.S.
ISTANBUL, Turkey -- A U.S. official pledged large amounts of U.S. credit to build export pipelines out of the oil-rich Caspian Sea region through Turkey to the Mediterranean. The potential multibillion dollar promise is America's most important push yet for the development of an east-west oil-transport corridor that skirts the territory of U.S. rivals in the area, Iran and Russia.
"There is no limit" to the funds available, James Harmon, president of the U.S. Export-Import Bank, told reporters at an Istanbul conference. He predicted that his agency's lending to the Caucasus and Central Asia region could reach the levels of its lending to China, or about $6 billion. "We will do what's necessary to allow them to get the oil to market."
U.S. officials say they are cutting a Gordian knot of geopolitical and commercial complications that is blocking individuals and companies from deciding on which of many proposed pipelines should be built out of the
Caspian Sea region, where possible reserves may be 100 billion to 200 billion barrels. Washington also wants to rein in the current piecemeal
development of rail, barge and pipeline oil export routes which, despite opposition in the U.S., increasingly look as though they will include Iran.
Detailed feasibility studies haven't yet determined final price tags, but the three U.S.-backed pipelines are: a $2.5 billion, 1,030-mile oil line from the Azerbaijani capital of Baku, through Georgia to Turkey's deep-water port of Ceyhan on the Mediterranean Sea; a feeder to that oil line from Baku
150 miles under the Caspian Sea to collect oil from Kazakstan and Turkmenistan, which some estimate would cost $2 billion because of environmental complications such as underwater mud volcanoes; and a 2,000-mile natural-gas pipeline from eastern Turkmenistan, under the Caspian and through Azerbaijan and Georgia to Turkey, which would cost at least another $3 billion.
Any credit, guarantees and insurance will be at market rates, U.S. officials say. The plan is the financial extension of a key U.S. decision in October 1995 to give political backing to multiple pipeline routes, said William Courtney, special assistant to President Clinton and the region's director at the National Security Council.
In order to prepare a commercially viable package of pipeline proposals by October, the U.S. offered $750,000 to Turkmenistan in April for a feasibility study of the route under the Caspian Sea, and regional states have been holding a flurry of meetings. It is in October that Azerbaijan International Operating Co., the principal consortium pumping oil offshore in the Caspian, is to decide on its main export-pipeline route. So far, the AIOC has shown a reluctance to shoulder the expense of the long, U.S.-favored Baku-Ceyhan route on its own. "We will finalize terms, tariffs and taxes by the fall," said U.S. Energy Secretary Federico Pena, who believes construction could start soon afterward.
The pipelines are the centerpiece of a Caspian Sea Initiative that Mr. Pena launched at a conference in Istanbul last week, in support of 65 projects in the region valued at $20 billion. America's full court press on the issue was backed by the presence of 12 of the 14 U.S. ambassadors in the region, the first-ever attendance of the heads of all three U.S. trade-finance agencies at a meeting outside the U.S., and the presence of at least 60 U.S. officials among 700 businessmen and oil executives at the Istanbul oil conference.
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