U.S.-Backed Caspian Oil Project to Skirt Russia

ISTANBUL, Turkey —  The United States, Turkey and two Caspian Basin nations will announce agreement today on a plan to build a 1,240-mile pipeline that would tap rich oil fields in Central Asia while further weakening Russia’s grip on a region once firmly in the Soviet orbit.

The $2.4-billion project would carry up to 1 million barrels of oil a day from Baku, the capital of Azerbaijan, through Georgia before finally reaching Ceyhan, a Turkish port on the Mediterranean Sea, where it would be pumped aboard tankers.

The agreement, while coming as no surprise to Moscow, is sure to cause friction in what was already expected to be a difficult meeting today between President Clinton and Russian President Boris N. Yeltsin on the fringes of a European summit here.

U.S. officials, uncertain how Yeltsin will respond to increasing Western pressure to restrain the Russian war in the separatist republic of Chechnya, are approaching the meeting with the Russian leader with some trepidation.

“It is possible they will go on the offensive to avoid being put on the defensive,” a senior Clinton administration official said, adding, “There is no such thing as a predictable meeting with Yeltsin.”

The Russian president sounded defiant on his arrival in Istanbul.

Asked whether Russia will reach an understanding on Chechnya with the West during the two-day summit, he replied: “I hope that, on the contrary, everyone will realize that in Chechnya, Russia is acting in compliance with international, civilized standards and rules. . . . I am sure this will happen, especially after my speech at the summit.”

Recognizing that the oil pipeline project will add fuel to the fire, U.S. National Security Advisor Samuel R. “Sandy” Berger on Wednesday tried to reassure Moscow on the plan, saying, “This is not directed against Russia in any way.”

Russia made a last-ditch bid two weeks ago to halt the project, dispatching a deputy prime minister to Azerbaijan and seeking to maintain support for an existing distribution system that crosses Chechnya. But the mission failed, with investors concerned about the risk to any pipeline built through a region where Russian troops are battling Islamic insurgents.

Geopolitical issues were the key factor in the Clinton administration’s push for the Turkish pipeline route.

The oil-rich Caspian states are landlocked. To move the oil to Western markets, pipeline builders had three choices: Move the oil by pipeline north into Russia, south into Iran or west, toward Turkey.

By opting for the westward route, the United States and its partners in the region are moving to loosen the potential grip by Moscow and Tehran on the Caspian oil spigot--and, administration officials figure, similarly restrict Russian and Iranian influence in the region and beyond.

“The route is not news. The U.S. government has been pushing for it since 1997. It’s an obsession of the U.S. government that it go through Turkey,” said Julia Nanay, director of Petroleum Finance Co. in Washington. “The news is the cost issue and who’s going to pay for it.”

Nanay said cost is an issue because there may be too little oil in Azerbaijan to justify the length and cost of a Baku-Turkey pipeline on a strictly commercial basis. That’s why lead Caspian Sea oil developer BP Amoco had pushed for a shorter route before acceding to the U.S. plan last month.

“The question is where the oil is going to come from,” Nanay added. “For the pipeline to have enough oil to be economically viable, oil from Turkmenistan and Kazakhstan will probably be added,” she said.

The administration conceded Wednesday that commercial negotiations covering the financing of the pipeline--and additional political negotiations--must still be completed. Participating oil companies must still negotiate agreements pledging shipment of specific volumes of oil to obtain the necessary financing.

The pipeline, which is to be completed by 2004, will largely serve refineries along the Mediterranean and in Western Europe, but it will have a global impact by reducing reliance on Persian Gulf oil supplies.

Completion of the pipeline, said a senior Clinton administration official, will be “a transforming event” in the struggling region: “It will become a commercial corridor and strategic magnet to the West.”

Clinton will sign the agreement today as a witness, along with the participants in the project: Georgia, Azerbaijan and Turkey.

Clinton is on a 10-day European trip. He spent much of Wednesday sightseeing in the ancient city of Ephesus on the Aegean coast of Turkey and met for 30 minutes with Israeli Prime Minister Ehud Barak.

Berger reported that the leaders discussed unresolved differences between Israel and the Palestinians but made no progress.

Today, the focus of Clinton’s schedule is the summit of the 54-nation Organization for Security and Cooperation in Europe. The summit was called to consider issues across a broad spectrum and to take stock of European diplomacy and security at the end of the century, but like so many such gatherings, one issue threatens to galvanize attention--in this case, the fighting in Chechnya.

A top Russian official hinted Wednesday that Moscow expects to regain control over Chechnya by February, declaring that all refugees who have fled the fighting will be returned to their homes by then.

Russian Emergency Services Minister Sergei K. Shoigu, the point man for dealing with the refugee crisis, said Russia had a three-stage plan for the return of refugees by February, but he stopped short of promising that the war would be over by then.

“I said only what I said, and I count on your guesswork,” Shoigu told reporters here. His statement marked the first time a Russian Cabinet minister had suggested a timetable for ending the war--albeit one that some might consider overly optimistic.

His comments appeared designed to defuse some of the harsh criticism that Russia expects to receive at the summit.

The West is torn on the issue of Chechnya: Clinton acknowledges Russia’s right to counter what the Kremlin views as a terrorist threat, and he recognizes the political popularity among Russians for the military campaign. But he opposes tactics that have produced large numbers of civilian casualties and 200,000 refugees.

“The situation is a mess for Russia,” one senior Clinton administration official said.

* Times staff writer Chris Kraul in San Diego contributed to this report.