The original URL for this article is http://www.flyingfish.org.uk/articles/balkan/pipelines.htm

Journal of Southern Europe and the Balkans, Vol.4, No.1, May 2002, pp.75-89.

A Meeting of Blood and Oil: The Balkan factor in Western energy security

Energy policy needs to be debated in the political arena, which implies the need for greater public information. ¹

Introduction

At the very margins of the media coverage of NATO's bombing of Yugoslavia, one might have stumbled across a stifled debate over the West's broader strategic motives for the campaign. According to John Pilger, the real issue was oil. NATO's professed motive of humanitarian intervention concealed the true motive, 'the impatience of the imperial godfathers to complete their most urgent post-cold war project: the establishment of an oil protectorate all the way from the Persian Gulf to the Caspian Sea.'² Robin Cook, Britain's Foreign Secretary at the time, retorted,

We have demonstrated that we are willing to undertake military action, not to seize territory, not for expansion, not for mineral resources. There is no oil in Kosovo. The Socialist Workers' Party keep saying we are doing this for oil, which is deeply perplexing, since there is only some dirty lignite, and the sooner we encourage them to use something other than dirty lignite, the better. This was a war fought in defence not of territory but in defence of values. So here I can say ... foreign policy has been driven by those concerns. ³

However, Cook's denial would not satisfy the sceptics, who were claiming that oil from the Caspian Sea region, not Kosovo, was the prize. As the respected newspaper columnist Jonathan Freedland put it,

Point out that there's no oil in Kosovo, and the comrades will steal a quick glance at the hymn sheet that is the Socialist Worker, before repeating, in chorus that, oh yes, America's real object is 'the oil in the Caspian sea'. Never mind that that's half a continent away, lodged between Iran and Turkmenistan: in the mind of the Socialist Worker, it all makes perfect sense. ⁴

As far as I can discover, this was as sophisticated as the 'debate' was to become; an unsubstantiated claim that Caspian oil was at stake countered by the observation that this oil is 'half a continent away' from Central Europe. Hence, in this article I attempt to take the debate beyond the political and media rhetoric by seeing how well Pilger's claim stands up to proper scrutiny. Could Caspian energy resources conceivably be a factor behind NATO's Balkan strategy? The answer, I believe, is yes, since it does seem that instability in the Balkans would impact seriously on the requirement for a safe passage for Caspian oil and gas to the West.

After explaining why, in the global context, Caspian energy is strategically important to Europe and the United States, I shall trace the development of EU and US policy on securing access to these resources. For more than a decade, policy has been driven by an understanding that crucial westward transport routes for Caspian oil and gas would have to pass through the Balkans. Most tellingly, for several years before NATO's 1999 attack on Serbia for its militarisation of Kosovo, the US had backed a proposal for a Caspian oil pipeline which would pass through the Macedonian capital Skopje, only 20km from Kosovo's southern border.

Ever since the genesis of these issues in the break-up of the Soviet Union they have barely registered in the news media, making it hard to avoid the conclusion that truth is the first casualty not only of war but also of peace - being the run-up to potential war.

The Need for Caspian Energy

It can hardly be overstated how crucial energy supplies are to the industrialised nations. In addition to their heavy reliance on the synthetic products derived from oil, their economies are highly energy-intensive, being particularly dependent on fuel for transport:

The instability of energy supplies, whether linked to erratic fluctuations in prices, relations with producer countries or a chance event, may cause serious social disruption. Today, petrol is vital for the functioning of the economy, like bread. Any disruption of supply is likely to lead to social demands, if not social conflict. The situation is similar to that created by a bread shortage two hundred years ago.⁵

Indeed, it was only a few decades ago that the oil crises of 1973 and 1979 led to fuel shortages and social disruption, the smaller oil crisis of 1990 awakening bad memories. Since each was the result of political events in the Middle East over which the West had little control, the industrialised nations were shaken into adopting energy policies aimed at minimising their vulnerability to any disruption in supplies from the region, the location of by far the greatest concentration of the world's energy resources.⁶   These policies included establishing strategic fuel reserves, introducing energy efficiency measures, diversifying fuel sources from oil to nuclear and gas, and more vigorously developing domestic energy resources - most significantly those of the North Sea in Europe and Alaska in the US.

However, nothing could change the fact that Europe, North America and Japan especially would remain heavy net energy importers, so they also sought to spread their import risk away from the Middle East by diversifying supply sources geographically. In the year after the 1973 oil crisis, the European Commission was already recommending that 'to reduce the risk of failure of certain streams of supply, sources must be sufficiently spread and none must occupy too exclusive a place.' ⁷   Canada, Venezuela, Mexico, Indonesia, North and West Africa and Russia, for example, have helped to spread this risk felt by the major energy importers. The 1990 Gulf war prompted President George Bush's 1991 National Energy Strategy which again urged greater production outside the Gulf, to which the removal of world trade and investment barriers would be essential:

Development of these resources would bring economic benefits to producing and consuming countries alike; it would relieve over dependence on Middle Eastern suppliers and reduce political pressures in this historically volatile region.
Accordingly, in trade negotiations and in our bilateral and multilateral consultations, the United States will continue to urge an end to protectionist policies, national subsidy programmes and restrictions on foreign investment, which severely limit resource development in many Latin American, Asian, and African countries. We have also begun to work actively with the International Energy Agency, the Export-Import Bank and producing countries to identify and remove barriers to energy investment, production and trade around the world. ⁸

1991 also saw the final collapse of the Soviet Union, opening up the oil and gas reserves of the New Independent States. These reserves, in the region of the Caspian Sea, are generally considered to be on the scale of those of the North Sea or the US, proven reserves being around 3 percent of world total for oil and 7 percent for gas. ⁹   Although this is a small proportion of total reserves, it would seem that energy security considerations magnify its significance for the energy-hungry:

Considering the assessments of modest quantities of Caspian oil, why has this region received such high-level attention from Western governments? The answer to this question lies in the field of energy security: additional supplies, even at modest levels of output, can make an important contribution to limiting the market power of the major producers as well as reducing to some extent the percentage of world oil production subject to disruption. Therefore, this marginal oil can bring about a lowering of prices and can enhance energy security.¹⁰

In other words, for those countries which are now, or soon to be, dependent on energy imports, Caspian energy presents an opportunity to continue diversifying supply so as to spread the economic and political risk. This accords with the International Energy Agency's (IEA) projections to 2020, whereby a 2 percent a year increase in world energy demand - fuelled largely by developing regions such as China ¹¹ - will increase the competition for resources just at the time when the combined reserves of the already developed regions begin to be exhausted. By 2020, oil import dependence is predicted to rise to 58 percent for North America and 79 percent for Europe, and gas dependence to rise to 6 percent and 62 percent respectively. ¹²   Following past experience, the risk is seen to be the concentration in too few hands of the power over energy supplies rather than any worry that total world reserves are dwindling. In addition to worries of dependency on the Middle East and the Organisation of Petroleum Exporting Countries (OPEC), Europe has concerns over its large and increasing dependency on gas from Russia, currently 41 percent of imports but predicted to rise to more than 60 percent, largely due to the rapid turn towards gas for electricity generation following technological developments which made it more efficient than coal. ¹³

These energy security considerations thus lend Caspian energy a greater importance than might be expected from the figures alone. Any oil supplies which spread the political risk away from OPEC are seen to be a good thing, and these newly-available gas reserves are within pipeline distance of Europe, keen to avoid too heavy a dependence on Russia and Algeria.¹⁴   Regardless of the actual appropriateness of this energy strategy, rooted in the oil crises of the '70s, it persists today, President George W. Bush inheriting his father's tone in the recent US national energy plan: 'Diversity is important not only for energy security but also for national security. Over-dependence on any one source of energy, especially a foreign source, leaves us vulnerable to price shocks, supply interruptions, and in the worst case, blackmail.' ¹⁵

Pipeline Routes to Market

The Black Sea shelf and coastal regions, although little explored, are not likely to reveal reserves that will supply any but local markets. The importance of the Black Sea resides in its geographical location, halfway between two major oil and gas supply regions - Russia and the Caspian - and large markets, such as Turkey, Southeast and Central Europe, and the Mediterranean. ¹⁶

The oil and gas reserves of the Caspian Basin are landlocked and have to be transported across borders through a region simmering with political tensions, themselves often caused by the scramble for energy riches. Politics and economics intertwine as the world's oil and gas companies fight for control over energy deposits and transit routes.

Since the early 1990s, Western oil companies have staked large investments in the Caspian region, though at the same time inhibited by the political - as well as technical - uncertainties. Among the most important operations are the following: ¹⁷
- Kazakhstan. On 6 April 1993, TengizChevroil (TCO), a consortium headed by US Chevron Corp. and including Kazakh Tengizneftegaz, was set up to exploit the Tengiz and Korolev oil fields by investing $20 billion over the contract's 40-year period. ¹⁸
- Azerbaijan. On 20 September 1994, an international consortium signed an $8 billion, 30-year contract to exploit the Azeri-Chirag-Guneshli (ACG) oil fields. Run by the Azerbaijan International Operating Company (AIOC) and now headed by BP Amoco, the consortium includes among others the State Oil Company of the Azerbaijan Republic (SOCAR). This was dubbed 'The Contract of the Century'. ¹⁹
- Azerbaijan. On 4 June 1996, a BP Amoco-led consortium signed a contract for the Shah Deniz gas reserves. ²⁰
- Turkmenistan. As part of the Soviet Union, Turkmenistan was a major supplier of gas and continues to be. Companies such as Exxon Mobil and Dragon Oil have invested in the country. ²¹
- Kazakhstan. International consortium Offshore Kazakhstan International Operating Company (OKIOC) is expecting to confirm the existence of large reserves in the Kashagan oil field. ²²

Without oil and gas transport routes to market, these investments become worthless. Indeed, the control of pipeline routes - with the associated transit fees and the power to turn off the taps - is almost as important as the control over the resources themselves, which is why the struggle to find secure, reliable routes has become the Caspian region's main story. The fact that the routes need to pass through several different countries makes this 'game' especially difficult, as it only takes a problem in one of the countries to endanger the energy flow.

The Soviet Union developed - predominantly for gas, which it exploited more than its oil reserves - a vast, integrated pipeline system throughout the Warsaw Pact territory, a network of thousands of miles of pipeline from Siberia to eastern Europe. With the collapse of the communist bloc, this once centrally-controlled system fell under the fragmented jurisdictions of the newly autonomous nations. ²³  Each was now also able to exploit and market its own resources, which the existing pipeline system had never been built for, being a more closed system. Thus, while much of the existing network could still be used locally, the export of oil and gas from the Caspian region to world markets would require the construction of new pipeline routes across a patchwork territory of conflicting interests.

Energy can be exported westwards from the region via the Baltic Sea and surrounding states, the western Black Sea coast, Turkey, and Iran via the Gulf. Iran has been all but ruled out due to political animosity from Washington and an aversion toward reliance on the Gulf region, despite the fact that it is commonly agreed to be the easiest outlet from a commercial standpoint. The Baltic region is an important export route for Russian oil and gas, in particular the communist-built Druzhba pipeline system from Ukraine, through Poland and Slovakia and beyond to Croatia; from here, Druzhba can connect with the Adria pipeline system reaching the Croatian Ariatic coast. The Druzhba system supplies much of the Russian energy, mainly gas, on which the EU has become dependent, and while the EU is keen to keep its Russian energy flowing - attaching great importance to maintaining good relations with Moscow - Western governments and companies also regard themselves as being in territorial and commercial competition with Russia. ²⁴

The West has a distinct preference for transit routes which avoid Russian territory or regions under heavy Russian influence, as well as being keen to secure energy markets which are currently, or potentially, lucrative for the Russian energy companies, mainly the giant Gazprom. This company already has the lion's share of the east European market - inherited from the communist era - which is set to grow significantly and which will increase the EU's energy dependency on Russia as these countries accede to the EU. Competition with Gazprom to secure the Turkish gas market is also raging.²⁵

A crucial piece of this geopolitical jigsaw is the limited capacity of Turkey's Bosphorus Straits to handle the increasing oil tanker traffic from the eastern Black Sea ports out towards the Mediterranean and world markets.²⁶   This has dictated the need for overland pipelines which bypass this shipping lane: southerly across Turkey (the Baku-Ceyhan plan) or westerly from the Black Sea ports of Bulgaria and Romania.

However, for the last decade transit problems closer to source have presented the greatest hurdles, in particular those facing the BP Amoco-led AIOC in its need for an 'early oil' pipeline from Azerbaijan to a Black Sea port.²⁷  While most of a pipeline route north-westwards to the Russian port of Novorossiisk was already in place, it passed right through Grozny, the war in Chechnya rendering the pipeline often unusable until the Russians built a bypass pipeline around the war zone. Greater investment and time were required for an alternative route through Georgia to its Black Sea port of Supsa, but highlighted the merits of a diverse, multiple pipeline strategy:

The inability of both the Russian state and pipeline authorities to resolve the Chechen issue vindicates the AIOC's decision to pursue a dual pipeline strategy for its early oil exports… The only factor which could throw this prospect into doubt would be a return to major political conflict in Georgia or in Azerbaijan's Armenian-populated region of Nagorno-Karabakh, which is close to the route of the Georgian line.²⁸

The recent completion of a pipeline westwards - through Russia, skirting the Caspian Sea's northern coast - for exports from Kazakhstan and Turkmenistan increases the importance of this Georgian link to the Black Sea.²⁹   This further westwards flow of oil in particular heightens the need for pipelines from the Black Sea's western shores, the Bosphorus shipping lane being unable to accommodate this kind of increase in traffic. A 1995 EU Green Paper emphasises the importance of the Black Sea region for European energy security:

Cooperation with the countries of the Black Sea is essential for the security of transit into the Community… With regard to oil transport, the Black Sea is strategically important in relation to oil supplies for the Community; political and environmental developments in the region will not be without implications for future supply options. ³⁰

Thus, we shall now see how this long-foreseen requirement for pipelines from Bulgaria and Romania has manifested itself in Western policy towards the Caspian region, south-eastern Europe and the Balkans.

A Hidden Pipeline Agenda

The Commission would remind the Honourable Member of the Community's position on the importance of resources from the Caspian Sea region for European energy supplies, [and] the need to have a number of safe supply routes to the European and international markets… Consequently, in view of the impending enlargement of the Community and in the interests of secure energy supplies, the Commission has been implementing an interstate technical assistance programme (Inogate - Interstate oil and gas transport to Europe) since 1995, being aware of the need to facilitate the integration of oil transport networks between the former Soviet Union, the countries of Central and Eastern Europe and the Community… It has facilitated the emergence of a variety of projects linking the Caspian Basin to European markets via the Trans-Caucasian corridor, the port of Supsa and ports on the Western shore of the Black Sea. These included the Constanta-Trieste, Odessa-Gdansk, Burgas-Alexandropoulis and Burgas-Vlore projects.³¹

After the break-up of the Soviet Union, US foreign policy toward the region was dominated by the problem of how to deal with a now-fragmented adversary lacking a clear structure of command over its nuclear arsenal, much of it located not in Russia but in the Ukraine.³²  It has been argued that the oil companies of the US were the vanguard of their country's interest in Caspian energy, that 'the importance of the Caspian and the Caucasus was discovered in Houston, not in Washington.' ³³   EU officialdom probably was relatively free, under the US' wing, more overtly to devote attention to the energy security implications of the Caspian region, also being much closer to home for the EU.

Even as the Soviet Union was in its final death throes, in June 1990 at an EU summit, Dutch Prime Minister Ruud Lubbers broached the idea of a European-wide energy community which would 'capitalise on the complementary relationship between the European Economic Community, the USSR and the countries of Central and Eastern Europe'. ³⁴   With this 'Lubbers Plan', as it became known, the EU was running for Caspian energy even before the starting pistol had been fired!

The Lubbers Plan and a plethora of EU aid programmes to eastern Europe and the former Soviet Union were motivated by the bottom line of European energy security. Europe was already heavily dependent on the region for gas in particular, and so, in the short term, the complete economic collapse of one of its main energy suppliers could spell trouble. At the same time, the newly opened-up resources of the Caspian region presented the EU with an opportunity ultimately to strengthen its longer-term energy security. Firstly, continued and further exploitation of these energy resources would require large investments from the West. Secondly, the fragmentation of a once centrally-controlled energy transit system stretching from Central Asia to eastern Europe would require some kind of knitting back together. The Lubbers Plan evolved into the Energy Charter Treaty (ECT), a multilateral agreement - from an early stage including countries beyond Europe and the former Soviet Union - designed to provide a legal framework within which these basic aims could be pursued, with various EU programmes springing up to aid their implementation.

The ECT addresses the legal and structural impediments to investment and trade in the energy sector which existed after the break-up of the Soviet bloc: the absence of a legal and cultural foundation for market-oriented private enterprise and investment, and the disappearance of a framework for the co-ordination of cross-border energy transit. For example, in the sphere of investment,

[u]p to 1992 the first step of any foreign investor was to start negotiations with various government agencies in order to create a tailor-made playing field for the enterprise in view. The result was frequently a contract often established by presidential decree.  Floating in a legal and fiscal vacuum, this had to be defended constantly against other government agencies’ attempts to influence and alter the agreed terms of business. ³⁵

Though one might have thought this to be the ideal of laissez-faire, free market deregulation, it had the effect of leaving the energy companies of the world's economic powers feeling vulnerable to the whims of foreign sovereign governments. Thus, the ECT 'is, first and foremost, a legal instrument determining the behaviour of governments towards industry,' whereby states agree to surrender a degree of control over their natural resources (energy) and territory (access for energy transit) as a pre-requisite for foreign investment. For investors, there should be no repeat of the nationalisations - socialist or otherwise - of the 50's, 60's and 70's: the ECT 'has broad political implications. This, however, did not prevent it from being negotiated mainly from the investor’s point of view.' ³⁶   At the suggestion of the US, the provisions of the General Agreement on Tariffs and Trade (GATT) were incorporated into the Treaty. However, the US eventually refused to sign up, even threatening to leave the negotiating table in protest at provisions in the ECT which, it felt, did not grant strong enough rights to foreign investors.³⁷   From an opposing angle, Russia has stalled its ratification of the Treaty, feeling that it would give away too many rights to foreign business and to the states within its traditional sphere of influence. ³⁸   Among the 49 original signatories to the Treaty, on 17 December 1994, were Romania, Bulgaria and Albania, as well the EU, Georgia, Azerbaijan and Kazakhstan; all of these have now ratified the Treaty, along with Macedonia.

The ECT's rules on investment access and protection are complemented by rules on territorial access and guarantees for international energy transit. These rules are now being extended by the Transit Working Group, set up at a December 1998 meeting of the Energy Charter Conference ³⁹, its Chairman at the time being, 'conscious of the key importance of transit as a political issue: after all, ensuring diversity and stability of energy supplies represents one of the major challenges facing the entire international community over the next few decades.' ⁴⁰   On European energy security, the Conference's current Secretary-General states,

In strategic terms, this means ensuring greater diversification of supply sources, with the aim of ensuring that Europe's vulnerability to possible disruptions in supply from any single area is reduced to a minimum. Consequently, this implies a growth in importance for Europe of new oil and gas production areas, often in land-locked areas such as the Caspian Sea region. Ensuring the security of supply from such areas is a key strategic task for governments. And this will only be achieved if a commonly-accepted regulatory regime covering grid-bound energy transit flows is put in place. ⁴¹

In a speech to the Russian parliament in 1997, the then Secretary-General of the Energy Charter Conference made some bold claims for the Treaty:

[T]he Energy Charter Treaty is truly a milestone in East-West energy co-operation: there can be no doubt that combining the capital and energy dependence of the West with the huge energy resources of Russia and the other CIS-Republics will be of mutual benefit to all concerned. This economic alliance, which brings together former adversaries, is clearly one of the most significant achievements of this decade.⁴²

For a treaty which most people have never heard of, this is quite something. But then, as Chris Patten, European Commissioner for External Relations, says of the EU's East-West trade policies, '[s]ince I joined the Commission last September, I have been privileged to see the scale and variety of the EU’s external assistance programmes. They are rarely high profile and often take effect over time rather than in one big bang.' ⁴³

Over the last decade, the EU has run a battery of aid programmes aimed at advancing its energy security interests in the Caspian and Black Sea regions and the Balkans. TACIS (Technical Assistance to the Commonwealth of Independent States and Georgia) emerged soon after the break-up of the Soviet Union as a way to economically stabilise the region and initiate longer term relations with the New Independent States. Given the need for infrastructure as a precondition for the exploitation of the region's energy resources, TACIS spawned two network infrastructure programmes, TRACECA and INOGATE, under its Inter-state programme:

Infrastructure networks need modernisation and restructuring, so that new trading opportunities can be exploited and the transport of raw materials within and outside the NIS can be facilitated... Most NIS still have only modest trade with the EU... Over-centralisation of transport and energy networks in the Soviet era has restricted these countries' access to markets under competitive and open conditions… The focus on networks aims to:
- strengthen transport, energy and telecommunications links between the NIS
- link the NIS' and the EU's energy, transport and telecommunications networks
- regenerate inter-state trade and allow for the further diversification of trade through new routes.⁴⁴

TRACECA (Transport Corridor Europe-Caucasus-Asia) was set up in 1993, following a proposal by Georgian President Eduard Shevardnadze, to create 'a transport/trade corridor on an east-west axis from Central Asia, across the Caspian Sea, through the Caucasus, across the Black Sea to Europe.' ⁴⁵   The programme organised a large international conference in Baku in 1998, taking the East-West transport initiative away from Russia. ⁴⁶   Without the need for infrastructure development to support energy sector operations and energy transit, TRACECA would most likely never have got off the ground; according to Azerbaijani State Oil Company President Natig Aliyev '[t]he fundamental issue of the TRACECA project is the production and transport of energy resources.' ⁴⁷   For example, under the TRACECA programme, the EU has loaned $25m to Azerbaijan to upgrade its port near Baku 'to allow up to 500,000 bbl/d of oil shipments from the eastern Caspian.' ⁴⁸

INOGATE (Interstate Oil and Gas Transport to Europe) was launched in 1995 specifically 'to promote  the security of energy supplies', involving work on 'revitalisation of the existing transmission network and on new oil and gas pipelines across the Caspian, Black Sea region and westwards to Europe… and protection of foreign investments.' ⁴⁹   Concluding an INOGATE conference, Hans van den Broek described the programme's 'ultimate objective' as being 'to help free the huge and gas and oil reserves of the Caspian Basin by overcoming the institutional, technical and financial bottlenecks which have impeded access to local and European markets.' ⁵⁰   The programme has done this firstly by funding feasibility studies of the various options for transporting Caspian oil and gas to central and eastern Europe.⁵¹   Under INOGATE, the EU has supported studies of ways to export gas from Shah Deniz, of possible Armenian routes to export gas from Turkmenistan, and of the condition of the Druzhba oil pipeline network, and was behind the development of a pipeline from the Azeri port of Baku to the Georgian port of Supsa.⁵²

Secondly, INOGATE has drawn up an Umbrella Agreement, a legal framework covering specifically the operation of cross-border energy transit.⁵³  In light of the fact that the ECT already includes such legislation which itself is being elaborated, this additional treaty illustrates the importance which the EU attaches to overcoming the logistical hurdles to reliable energy transit across politically unstable regions. The Umbrella Agreement stipulates that there should be a cross-border Common Operator responsible for each transit system, that there must be an independent dispute resolution procedure, and that each country should maintain and guarantee the security of its existing pipeline infrastructure and encourage the development of further transit capacity. This Agreement was formally signed on 22 July 1999 by countries from Kazakhstan, Uzbekistan and Turkmenistan in the East to Romania and Bulgaria in the West. ⁵⁴   Macedonia's Vice-Prime Minister signed up on 8 October 1999, saying, 'Macedonia finds its interest' in this interstate oil and gas transit project, its official news agency adding that it 'should pass through Macedonia.' ⁵⁵

SYNERGY, another EU programme, works to promote international cooperation in the energy sector. In 1995, it held a conference on Balkans energy issues at which Energy Commissioner Christos Papoutsis formed the Balkan Energy Interconnection Task Force. ⁵⁶   Run by the Black Sea Regional Energy Centre, this Task Force was deemed necessary,

due to the complexity of the aims, e.g. … gas and oil transportation from remote sources, on the one hand, and the interconnections of Eastern and Southern European networks with those of West Europe, on the other.
This diversity of projects, institutions, support programmes and so on demonstrates the strategic role of the Balkans for the energy supply of Europe. With early ending of the conflicts in the former Yugoslavia this strategic character will become all the more evident.⁵⁷

In a 1997 memorandum, the Task Force - which included Romania, Bulgaria, Macedonia and Albania - recognised 'the strategic need for closer co-operation in the field of energy between the European Union and the Black Sea Region,' giving highest priority in the oil sector to 'projects which aim at facilitating oil exports from Russian and Caspian reserves.' ⁵⁸   Of the four oil pipeline projects listed, two in particular are important for the transport of Caspian oil, both from the Bulgarian Black Sea port of Burgas; one south to the Greek Aegean port of Alexandroupolis, the other west via Macedonia to the Albanian Adriatic port of Vlorë.

The Burgas-Alexandroupolis proposal is backed by Russia, Burgas-Vlorë by the US, a local instance of the regional competition for the political and commercial control over energy transit. Born in the early '90s both of these pipeline plans were intended as a way for westwards-bound oil to bypass the crowded Bosphorus shipping lane. In 1994, Bulgaria and a Greek-Russian consortium TransBalkan Pipeline - in which Gazprom had a large stake - approved the construction of the Burgas-Alexandroupolis pipeline, which would 'ensure that the Russians maintain their grip on oil export routes from the former Soviet Union.' ⁵⁹  Meanwhile, Vuko Tashkovich, a Macedonian-born American citizen, was forming the Albanian Macedonian Bulgarian Oil Pipeline Corp. (AMBO), also to transport Caspian oil westwards; officials of the three countries concerned soon registered their support for the project. Tashkovich was reported, at this stage, to have discussed the project with Chevron, ENI and the Russian Transneft, and to be interested in seeking Russian involvement first.⁶⁰  However, the Russian contacts seem quickly to have evaporated, AMBO the following year being reported to have attracted financing from the US government's Overseas Private Investment Corporation (OPIC), First Boston Bank and from the European Bank for Reconstruction and Development (EBRD). ⁶¹

By the mid-'90s, the US government had become more overtly politically alive to Caspian energy and the investments of its oil companies: 'These private economic interests eventually led to an increasing governmental interest in the region.' ⁶²   However, further down the line, 'the fighting in former Yugoslavia sits like a massive roadblock across everything.' ⁶³   Thus, in July 1996, the Clinton administration set up its Southern Balkan Development Initiative (SBDI), a $30 million project designed to enhance regional cooperation over transport between Albania, Macedonia, and Bulgaria.⁶⁴  According to an Albanian official, SBDI is essentially intended for the East-West transportation development project Corridor VIII. ⁶⁵   This also happens to be the route which the AMBO oil pipeline would mostly follow.⁶⁶  A statement marking the Bulgarian President's early 1998 visit to Washington set great store by the US's funding programmes such as SBDI, acknowledging the two countries' ‘common interest in expanding mutual trade and investment and encouraging the development of multiple routes for energy from the Caspian Basin.’⁶⁷   Transport Corridor VIII was identified as a priority at a 1994 pan-European Transport Ministerial and comes under the EU's PHARE programme. ⁶⁸

In 1998, the US’ Energy Secretary announced its Caspian Sea Initiative, established to support US-favoured pipeline projects in the region, and made up of all three of its trade and investment funding agencies: the Export-Import Bank (Eximbank), OPIC and the US Trade and Development Agency (TDA). Commenting on the importance of Caspian resources to US energy security, and thus the need to assist US business interests in the region, a White House official has stated,

The United States, starting with the President, has made this a high object for U.S. foreign policy. As the President said the other day, these pipelines are not often in the U.S. headlines, but the impact that they can have for world energy markets, the impact that they will have for U.S. energy security, the impact that they can have for  regional security and security on the eastern flank of NATO and Europe, it’s a profound impact. It may be 10 or 20 years before we’re actually able to gauge the benefit that this multiple pipeline strategy will have. ⁶⁹

Given this level of priority, conflict in the Balkans would be a clear hindrance to the US's energy security policy, seriously undermining the possibilities for developing energy transport pipelines to the West. Anticipating a visit to Washington by Macedonian President Kiro Gligorov in 1997, a State Department official acknowledged that 'foreign investors have somewhat stayed away because they see it as being contiguous to a war zone.' ⁷⁰   Back in 1993 - and just after the US had deployed peacekeeping troops on Macedonia's border with Kosovo - US business interests in the region were already clearly a factor: 'One of the principle obstacles to investment "is the potential for the spread of conflict in the Balkans. The chances of Albania being drawn into a Balkan conflict are very real," U.S. Ambassador William E. Ryerson said.' ⁷¹

On 2 June 1999, the US TDA announced that it would fund an update of AMBO Corp.'s earlier feasibility study of its pipeline proposal, a project on the back-burner for several years due to the militarisation of Kosovo and NATO's eventual bombing campaign - or ‘for political reasons,’ as it was euphemistically put. ⁷²  The timing of the funding announcement was perfect:

''This grant represents a significant step forward for this policy (of multiple pipeline routes) and for U.S. business interests in the Caspian region,'' said TDA Director J. Joseph Grandmaison. The decision came shortly before NATO and Russia reached agreement on how to force an end to the Kosovo conflict… The continuing conflicts in Yugoslavia have made it appear impractical in past years. But the prospect that the U.S. government would guarantee security in the region and also provide financial guarantees now makes it a much more attractive proposition. ⁷³

The following day, Serbia finally agreed to a NATO occupation of Kosovo. A year later, AMBO produced its new, upbeat feasibility study, in which US Ambassador Richard Armitage provided his analysis of the political factors:

In what one could term a "bombing dividend" or a quid pro quo to the support provided by these surrounding states to NATO during the Kosovo conflict, Albania, Macedonia and Bulgaria now seek economic compensation from the west for their support.⁷⁴

A month after releasing its study, AMBO President Ted Ferguson - who formerly worked for British Petroleum and in the Caspian region for Brown & Root - said that Chevron, Texaco and BP Amoco had shown an interest in the project. ⁷⁵

British NATO troops have just entered Macedonia as part of a counter-insurgency operation, already claiming the life of a Royal Engineer who most likely knew nothing of the energy security dimension to what he had become involved in.⁷⁶   There are those who do know but either do not tell us or lie to us when asked, as, I now suggest, did Robin Cook when dismissing any possible connection between Caspian oil and Kosovo. A year before NATO's bombing campaign, he presided over an EU Council Meeting which produced the following 'Declaration on Caspian energy (pipelines)':

The Council believes that the Caspian Basin could make a major contribution to global oil and gas supplies within a decade. The EU has an interest in promoting the exploitation of the region's reserves. It will continue to encourage regional stability, including a peaceful resolution of conflicts, and the development of robust democratic and economic institutions. Investment by European companies, particularly in the energy sector, will be a major factor. The EU will actively help to safeguard those interests.
The Council considers that secure export routes for Caspian oil and gas will be crucial to the future prosperity of the region, to the foreign companies investing in exploitation of those reserves, and to international markets. The construction of multiple pipeline routes is therefore logical and desirable. Foreign investors will need to take account of all the relevant factors - political, geographical and financial - in reaching strategic decisions on pipeline routes. The Council believes that the timing of those decisions and the specific routes chosen should remain essentially a commercial one for the companies concerned. The Council also attaches importance to revitalising the existing regional pipeline network.
In this context, the European Union's Interstate Oil and Gas Transport to Europe Programme (INOGATE) should be an important contribution to ensuring security of supplies . The EU will also continue to support the development of transport links and networks in the region, notably through the infrastructure projects linking Europe, the Caucasus and Central Asia (TRACECA).⁷⁷

Footnotes:
[1]  'Geopolitics and Supply of Energy: Summary', Energy in Europe , Special Issue, July 1990, p.121. US/EC Conference session (7 May 1990) co-chaired by David Howell, MP, UK and Dr. M. Gallego, President, Hidroastur, Madrid.
[2]  John Pilger, 'Tony Blair is deceiving us: he is not telling the nation about the real dangers of this war', New Statesman, 2 April 1999.
[3]  John Lloyd, 'The New Statesman Interview - Robin Cook', New Statesman , 5 July 1999.
[4]  Jonathan Freedland, 'Banning bombing', The Guardian, 2 June 1999.
[5]  'Towards a European strategy for the security of energy supply', COM(2000) 769 final, Green Paper, Commission of the European Communities, 29 November 2000, p.77.
[6]  See Edward L. Morse, 'A New Political Economy of Oil?', Journal of International Affairs, 53(1), Fall 1999, pp.1-29; Robert J. Lieber, 'Oil and Power After the Gulf War', International Security, 17(1), Summer 1992, pp.155-176; Jean-Claude Renaud, 'Security and energy in the post-crisis period', NATO Review, 39(1), February 1991, pp.21-23.
[7]  'The Community oil sector: medium-term forecast and guidelines', Commission of the European Communities, 1974, p.18.
[8]  W. Henson Moore, 'Towards global energy security', Petroleum Economist , June 1991. Moore was US Deputy Energy Secretary at the time.
[9]  'Towards a European strategy for the security of energy supply', Commission of the European Communities, op.cit., p.41; Martha Brill Olcott, 'Pipelines and Pipe Dreams: Energy Development and Caspian Society', Journal of International Affairs, 53(1), Fall 1999, p.310.
[10]  Lucian Pugliaresi, 'Energy Security: How Valuable is Caspian Oil?', Cambridge, MA, Caspian Studies Program, January 2001.
[11]  Tad Szulc, 'The New Bigfoot in the Global Oil Market', Los Angeles Times , 5 October 1997, p.M-2.
[12]  'World Energy Outlook 2000', International Energy Agency, OECD/IEA, 2000, pp.84,90.
[13]  'Towards a European strategy for the security of energy supply', Commission of the European Communities, op.cit., pp.42-46; IEA, op.cit., pp.95-98.
[14]  'Towards a European strategy for the security of energy supply', Commission of the European Communities, op.cit., pp.46,88. The Reagan administration was unhappy about Europe's increasing dependence on Russian gas imports.
[15]  Nancy Dunne and Stephen Fidler, 'US plans to boost energy production', Financial Times, 18 May 2001.
[16]  'Black Sea Energy Survey', IEA, OECD/IEA, 2000, p.17.
[17]  David Buchan and David Stern, 'Thirsty world waiting for more 'new' oil to flow', Financial Times , 8 August 2001.
[18]  Vladimir Babak, 'Kazakhstan: Big Politics Around Big Oil', in Michael P. Croissant and Bülent Aras (eds), Oil and Geopolitics in the Caspian Sea Region , Westport, CT, Praeger, 1999, p.194.
[19]  Nasib Nassibli, 'Azerbaijan: Oil and Politics in the Country's Future', in Croissant and Aras (eds), ibid., p.107. As of November 1999, the consortium partners were BP Amoco (34.1%), Lukoil (10%), Socar (10%), Unocal (10%), Statoil (8.6%), Exxon (8%), TPAO (6.8%), Pennzenergy (4.8%), Itochu (4%), Ramco (2.1%) and Delta (1.6%) - 'Black Sea Energy Survey', IEA, 2000, op.cit., p.53.
[20]  IEA, 2000, ibid. As of November 1999, the consortium partners were BP Amoco (25.5%), Statoil (25.5%), Lukoil (10%), Elf (10%), Socar (10%), OIEC (10%) and TPAO (9%).
[21]  Robert Smith, 'Politics, production levels to determine Caspian area energy export options', Oil & Gas Journal, 28 May 2001.
[22]  Bruce Stanley, 'Kazakstan's star rises as oil power', Associated Press , 10 August 2001. As of February 2001, the consortium partners were Agip (14.28%), BG (14.28%), ExxonMobil (14.28%), Royal Dutch/Shell (14.28%), TotalFinaElf (14.28%), BP (9.52%), Phillips Petroleum (7.14%), Inpex (7.14%) and Statoil (4.76%) - 'CIS - Keshagan contract clarifies Caspian export routes', Oxford Analytica , 15 February 2001.
[23]  'EU/NIS: Another Milestone for Inogate Energy Programme', European Report , No. 2383, 17 February 1999.
[23]  Amy Myers Jaffe and Robert A. Manning, 'Russia, Energy and the West', Survival , 43(2), Summer 2001, pp.133-152.
[25]  Carl Mortished, 'Worries for Europe in the pipeline from Gazprom', The Times , 25 April 2001.
[26]  'Black Sea Energy Survey', IEA, 2000, op.cit., pp.206-207.
[27]  Jennifer DeLay, 'The Caspian Oil Pipeline Triangle: A Steel Web of Confusion', in Croissant and Aras (eds), op.cit., pp.46-57.
[28]  'Azerbaijan: Caspian Outlets', Oxford Analytica, 9 September 1999.
[29]  Stanley, op.cit.
[30]  'For a European Union Energy Policy', COM(94) 659 final, Green Paper, European Commission , 11 January 1995, pp.38,46.
[31]  Answer (E/187) given by Chris Patten on behalf of the European Commission (23 February 2000) in response to written question (E-0036/2000) by Olivier Dupuis (TDI) to the Commission (19 January 2000), Official Journal of the European Communities , C 280, 3 October 2000, p.7.
[32]  Svante E. Cornell, Small Nations and Great Powers: a study of ethnopolitical conflict in the Caucasus, Richmond, Curzon Press, 2001, p.366.
[33]  Ibid., p.372.
[34]  Cited in Julia Doré, 'Negotiating the Energy Charter Treaty', in Thomas W. Wälde (ed.), The Energy Charter Treaty: An East-West Gateway for Investment and Trade, London, Kluwer Law International, 1996, p.138.
[35]  Peter Schütterle, Secretary-General of the Energy Charter Secretariat, 'The Energy Charter Treaty: Basis of the Future East-West Energy Cooperation', Centre for European Policy Studies, June 1996.
[36]  Ibid. See also M. Sornarajah, 'Compensation for Nationalization: The Provision in the European Energy Charter', in Wälde (ed.), op.cit., pp.386-408.
[37]  Doré, op.cit., pp.145-145, 149-151.
[38]  'Time running short for Energy Treaty', FT Energy Newsletters - EU Energy , 2 April, 2001.
[39]  Energy Charter Secretariat press release, 'Work Begins on Multilateral Transit Framework', 3 February 1999.
[40]  Energy Charter Secretariat interview with Henning Christophersen, Energy Charter Conference Chairman, 'Ensuring Diversity and Security of Supplies - the Main Future Challenge for the International Energy Sector', December 1998.
[41]  Dr Ria Kemper, Secretary-General, Energy Charter Secretariat, 'Energy Security For Europe: The Role Of The Energy Charter', Address to Centre For European Policy Studies, Brussels, 17 May 2000.
[42]  Peter Schütterle, Secretary-General of the Energy Charter Secretariat, 'The Energy Charter Treaty - General Evaluation', Speech to the Russian Duma, 17 February 1997.
[43]  Chris Patten, 'Foreword from the Commissioner', in 'Cooperation that counts: a focus on the European Union’s Tacis programme, 1999', European Commission, 2000, p.2. [My emphasis].
[44]  'The Tacis Programme Annual Report 1999', COM(2000) 835 final, Commission Of The European Communities, 20 December 2000, p.49.
[45]  Ibid., p.51; 'Caspian Sea Region', US Energy Information Administration, June 2000.
[46]  Michael P. Croissant, 'Georgia: Bridge or Barrier for Caspian Oil?', in Croissant and Aras (eds), op.cit., pp.281-282; Giles Whittell, 'Old Soviet states defy Russia with plan to rebuild Silk Road', The Times, 8 June 2001.
[47]  David Stern, 'Silk Road delegates sign foundation treaty, discuss oil pipelines', Agence France Presse, 8 September 1998.
[48]  'Azerbaijan', US Energy Information Administration, May 2000.
[49]  Press Release; IP:97/404, 'European Commission helps New Independent States (NIS) get oil and gas flowing: ECU 12 million committed this year', RAPID , 14 May 1997; 'US-EU Statement on Caspian Energy', US-EU Summit, London, 18 May 1998.
[50]  Hans van den Broek, Member of the European Commission, 'Concluding remarks at the INOGATE Conference', RAPID, 17 February 1999.
[51]  'EU/NIS: Another Milestone for Inogate Energy Programme', European Report , op.cit.
[52]  United States Energy Information Administration, 'Caspian Sea Oil and Natural Gas Export Routes', June 2000; 'Ukraine - Energy: Technical audit of the Ukrainian Oil Pipeline Export System', EuropeAid, Ref: TACIS/UA/SCRE1/No.50; 'INOGATE as a Route to Recovery for NIS', European Report , 20 February 1999.
[53]  'INOGATE as a Route to Recovery for NIS', ibid.
[54]  'Inogate Agreement Signed In Ukraine', FT Energy Newsletters - East European Energy Report , 30 July 1999.
[55]  'Extension of Inogate to Balkan countries', Inogate Newsletter, No.7, September 1999; 'Macedonia - European Union signed the agreement Inogate', Macedonian Agency of Information, 12 October 1999.
[56]  'Conclusions of the Synergy Conference on Gas, Oil and Electricity in the Balkans', Energy in Europe, 26, December 1995, pp.65-66.
[57]  Ibid., p.66.
[58]  Memorandum of the Balkans Energy Interconnections Task Force, 28 November 1997, p.1.
[59]  Kerin Hope, 'Russia to reap benefits of Balkan oil pipeline', Financial Times , 30 September 1994.
[60]  'Bosporus bypass planned', Platt's Oilgram News, 1 November 1994.
[61]  'Second Black Sea oil pipeline considered by Balkan states', East European Energy Report , 20 June 1995.
[62]  Cornell, op.cit., p.372.
[63]  Mehmet Ögütçü, 'Eurasian Energy Prospects and Politics: Need to a Longer-Term Western Strategy', in Wälde (ed.), p.100.
[64]  'TDA Supports U.S. Transportation Exports. Europe: Regional: Southern Balkan Development Initiative', US Trade and Development Agency, May 1998.
[65]  M. Pupa, 'Road 8 to be realised in three stages', Albanian Telegraphic Agency , 6 November 1998.
[66]  'Feasibility Study', AMBO Pipeline Consortium, May 2000, US Department of Commerce National Technical Information Service document no. PB2000106974, pp.I-70,I-72,I-79,I-84. White & Case, Halliburton/Brown & Root, CS First Boston, and PVM contributed to the study.
[67]  'Joint statement - U.S.-Bulgarian partnership for a new era', M2 Presswire, 12 February 1998.
[68]  'The Phare Multi-Country Transport Programme - Inventory and Achievements', European Commission, August 2000, p.7.
[69]  'Press Briefing by Senior Administration Official on Caspian Sea Diplomacy and the Baku-Ceyhan Pipeline', FDCH Federal Department and Agency Documents , 17 November 1999. [My emphasis].
[70]  'FYROM playing positive role in Balkans, official says', M2 Presswire , 17 June 1997.
[71]  Larry Luxner, 'Capitalizing on Capitalism Comes Slow for Albania', Journal of Commerce , 9 August 1993, p.1.
[72]  Iain Esau, 'US to aid Balkan pipeline route study', Lloyd's List , 8 June 1999.
[73]  Paul Michael Wihbey, 'Looking at Balkans route for Caspian crude', United Press International , 23 June 1999.
[74]  'Feasibility Study', AMBO Pipeline Consortium, op.cit., p.I-78.
[75]  'AMBO to build Trans-Balkan oil pipeline by 2005', Alexanders Gas & Oil Connections , 5(11), 23 June 2000.
[76]  John Laughland, 'Leader: Do Our Boys Have to be at the Frontline?', The Express , 28 August 2001, p.12.
[77]  'Council of Ministers Press Release: 2085th Council meeting, Luxembourg, 27 April 1998', RAPID, 11 May 1998. [My emphasis].

By Keith Fisher , August 2001.
keith@flyingfish.org.uk