MBA Education & C areers
INFOCUS
The Caspian Sea Oil Pipeline: A
geostrategic and security perspective
T
he ever-growing thirst for energy resources
in the developed and emerging markets has
led to the laying of huge pipelines from oil-
rich regions to their potential markets. The Baku-
Tbilisi-Ceyhan (BTC) pipeline is one such mega
project. The BTC project has generated much
heat in the countries through which it passes as
well in the markets where its potential markets lie.
The BTC pipeline opened in May 2005. The mega
pipeline is set to change the oil equations in the
region and between the countries that are partners
in this 1,762 km-long pipeline.
The pipeline would start from the Sangachal oil
terminal near Baku, capital of Azerbaijan. The
pipeline is a joint-venture between British
Petroleum, which has a 30% stake in the project
and a host of other oil majors including
ConocoPhillips, Unocal, and Socar (the last
named company is owned by the Government of
Azerbaijan).
The Caspian Sea region is home to some of the
largest oil and gas reserves in the world. Being
landlocked, the countries in this region have often
faced the problem of transporting oil and gas to
their potential markets. The BTC pipeline is seen
as the answer to this nagging problem.
The pipeline would transport oil from the oil-rich
Caspian Sea in Central Asia to the Turkish port of
Ceyhan. From here, oil would be transported to their
potential markets especially the US. The Caspian
Asia region is home to a high quality light-crude, a
commodity which is always in great demand.
Considered to be the largest energy project in
the world, the pipeline has cost an estimated $3.9
billion. The pipeline will transport a million barrels
of oil a day. The project has taken a little more
than a decade to complete.
- Bharat Jain
Along with the existing Baku-Supsa (in Georgia)
oil pipeline, BTC will greatly help the US and other
Western powers in reducing their dependence
on Middle Eastern energy sources. It will bring
the Central Asian region in touch with the West,
thus lending a strategic perspective to a
seemingly ordinary oil pipeline.
The BTC pipeline is expected to transform the
regions economy. The pipeline will help bring in
much-needed income to the countries in the region,
which in turn, could be used to build infrastructure
to stimulate the moribund economies of the region.
Oil is seen as a resource that will bring in
prosperity to the peoples doorstep.
The construction of the pipeline has already
brought social investment in the form of new
schools and hospitals, repair of old schools and
hospitals, installation or improvement in drainage
systems, and establishment of social
infrastructure.
To cite an example, it is being argued that by 2007
Azerbaijan is expected to earn over $7 billion in
oil revenue from the energy deposits in the
Caspian region. Oil is increasingly seen as the
panacea for the countrys economic problems.
From the very beginning, the project has been
mired in controversy. Analysts have castigated
the laying of the pipeline for the devastating
impact it could have on the environment in the
regions it passes through. Pipelines are prone to
ruptures (whether caused by sabotage or
accident), which could cause environmental
damage, sometimes catastrophic.
Also another serious aspect of the project has
been that it is easy prey to sabotage. The reason
for this is the fact that the pipeline passes through
one of the most volatile regions in the world.
September 2005 47
MBA Education & C areers
IN FOCUS
Attacks on pipelines happen with alarming
regularity. Robert Ebel of the Centre for Strategic
and International Studies says, Pipelines in
Iraq have been extremely vulnerable to the
insurgents. They are visible targets. A pipeline
is relatively easy to blow up if you know where
the weak, indefensible points are. And, of course,
with the pipeline down, you cant produce. With
a pipeline down, you cant export. If you cant
export, you cant earn any money to rebuild your
economy. So its sort of a double whammy.
As the pipeline passes through the volatile
Central Asian region, the pipeline has been laid
entirely under the terrain. Why is this region
considered to be volatile? An understanding of
the geopolitics of this region will help us
appreciate the safety concerns expressed over
the project.
The pipeline could be a target of terrorist attacks
from the various outfits that are against the
governments in the region. It is believed that
pipelines could be easily sabotaged with as little
as a simple explosive.
The pipeline starts from Azerbaijan. Azerbaijan
has a long-running conflict with neighbouring
Armenia over the disputed enclave of Nagorno-
Karabakh. Armenian nationalists have already
indicated that they will attack the pipeline, thus
directly hurting the Azerbaijan economy.
Georgia, another country through which the
pipeline runs, is witnessing a civil war and
disturbed relations with Russia. Russia is not in
favour of the pipeline. According to the Russians,
the pipeline, which is a non-Russian and
non-Middle Eastern source of oil, will reduce the
influence with and the bargaining power of the
Russians with the Central Asian republics.
Another unstable region through which the
pipeline passes is Turkey especially in the south.
September 2005 48
The Kurds are fighting the Turkish government
forces in the south for an independent Kurdistan
(in real terms, a greater Kurdistan - a territory
comprising Kurd-dominated North Iraq and
southeastern Turkey). The Kurd rebels could use
the BTC as a bargaining chip against the Turkish
government.
Also there is the ever-present menace of the
Chechen terrorists, the Islamic Movement of
Uzbekistan, as well as the Islamic Party of Eastern
Turkestan. These terrorist elements see the
pipeline as part of the US strategy to gain a
strategic foothold in Central Asia and control the
vast energy and mineral resources of the
Caucasus. The terrorists have used the pipeline
sabotage strategy to devastating effect in Iraq,
and have made clear their intentions to do the same
in the Central region, especially the BTC project.
Oil industry analysts have recommended a few
measures to safeguard the pipeline from terrorist
attacks. Some of these are: deploying state-of-
the-art surveillance equipment, deploying aerial
and ground patrols, and fortifying pipeline
systems against cyber-security breaches.
These security measures involve huge
investment in terms of labour and capital. The
increasing cost of guarding pipelines, oil terminals
and tankers against sabotage are all reflected in
the shooting up of prices of oil and gas.
Observers also say that educating people about
the economic and social benefits the pipeline
could bring in into their lives would significantly
reduce the risk of social unrest, which remains a
major threat to pipeline security.
While the benefits of the pipeline projects like the
BTC would outweigh the costs in the long run, there
is a great need for measures that could help us gain
energy independence. Only energy independence
can reduce the developed and developing worlds
vulnerablity to energy shocks.