Russia's New Reach: Gas Pipeline to Turkey


By DOUGLAS FRANTZ

 

STANBUL, June 5 — In early August, one of the world's largest and
most advanced offshore platforms will slip beneath the two graceful
suspension bridges spanning the Bosporus, with three feet of
clearance, on its way to the Black Sea.

 If everything goes as planned, a month later the huge rig will
begin laying a pipeline at record depths of 7,000 feet in corrosive
mud on the bottom of the great kidney-shaped sea to bring natural
gas from Russia to energy-hungry Turkey.

 The $3 billion project represents more than a daring engineering
feat. Its success would represent a setback in American efforts to
curtail Russia's influence in one of the world's most strategic
regions.

 "Both economically and politically, this project is extremely
significant for Russia," Fiona Hill, an analyst at the Brookings
Institution in Washington, D.C., said in a telephone interview. "It
is seen as a major coup for the Russian government."

 The pipeline would increase Turkey's dependence on Russian natural
gas from the current 66 percent to around 80 percent. From the
outset, American diplomats have warned that it would give Russia
too much leverage over Turkey, and that it would constrain gas
development in neighboring countries. But a powerful combination of
Turkish and Russian politicians and business interests pushed the
project through.

 Washington and Moscow have been at odds for years over the
development of energy in the Caspian basin, which could hold the
key to prosperity and stability in a troubled swath of land
sweeping from Turkey through the Caucasus and Central Asia to
China's western border.

 The region faces a Pandora's box of volatile issues with global
implications. Among them are rising Islamic insurgency, drug
trafficking, international terrorism, severe poverty and
potentially explosive ethnic tensions. Four nations bordering the
region have nuclear weapons — China, Russia, India and Pakistan —
and Turkey is a NATO ally mired in an economic crisis.

 Few nations are more vulnerable to energy blackmail than Turkey,
which imports 98 percent of its energy. Since it began phasing out
coal in the 1980's, demand for gas has increased steadily.
Two-thirds of Turkey's gas comes from Russia through two existing
pipelines, and demand is expected to quadruple by 2010.

 Not only is Turkey the region's biggest customer, it is also one
of the few with the hard currency to pay.

 To meet Turkey's rising needs for gas, the American government had
favored a pipeline from Turkmenistan to Turkey that would cross the
Caspian Sea, Azerbaijan and Georgia — totally bypassing Russia.
Turkmenistan has ample natural gas, and Western companies were
willing to finance and build the line.

 Russia countered with a proposed 750-mile pipeline from its Black
Sea coast to Ankara, the Turkish capital. The line would have three
segments — separate land sections in Russia and Turkey connected by
a 233-mile leg across the Black Sea from the Russia port of Dzhubga
to Samsun in Turkey. 

 It is this line, known as Blue Stream, that won out and is now
under construction.

 Blue Stream faced technical and financial hurdles, but it had
strong support from big Turkish corporations doing business in
Moscow; the corporations saw it as a way to strengthen economic
ties between the countries. This support translated into backing
from Turkey's powerful Motherland Party, which has been aligned
with big business.

 Mesut Yilmaz, now one of Turkey's deputy prime ministers and head
of the party, was prime minister when the Blue Stream project was
negotiated. Despite concerns in the government, he and Viktor S.
Chernomyrdin, Russian prime minister then, signed the deal with
great fanfare in Ankara on Dec. 15, 1997.

 "The military and the Foreign Ministry had reservations about
increasing our dependence on Russian gas, but Yilmaz went ahead," a
former Turkish official said.

 Mr. Chernomyrdin stepped down as prime minister a few months later
and became chief executive of Gazprom. The Russian company is
supplying gas for Blue Stream, and its construction arm,
Stroitransgaz, is in charge of building the pipeline. Mr.
Chernomyrdin left Gazprom last year, and is now Russia's ambassador
to Ukraine, but his sons own about 12 percent of Stroitransgaz.

 American diplomats stopped short of outright opposition to Blue
Stream, but they cautioned their Turkish counterparts against
relying too heavily on Russia, according to American officials.
They also warned that Blue Stream threatened the Turkmenistan
pipeline.

 In September 1999, Mr. Yilmaz had dinner with several Clinton
administration officials in Washington. He was out of government
then, though he remained head of the Motherland Party.

 "We really don't like this project," an American official told
him, according to a dinner participant and an official who was
briefed about the conversation.

 "Let me be plain," Mr. Yilmaz was quoted as replying. "I'm going
to get it done."

 A week later, Mr. Yilmaz went to Moscow with other Turkish
officials and businessmen to reassure the Russians that Blue Stream
was on course, according to two who joined the trip. 

 Last month, after the Turkish press raised questions about the
Moscow trip, Mr. Yilmaz told party members that he had no official
contacts in Moscow because he was not part of the government at the
time. 

 Turkey has continued talks with other potential suppliers, and
officials said they expected Iranian gas to arrive through a new
pipeline late this year, but no Turkmenistan gas is in sight. 

 Industry officials and American diplomats said the Turkmenistan
pipeline was essentially dead from multiple wounds. A $2 billion
contract for the pipeline was awarded in 1999, but the refusal of
Russia and Iran to resolve territorial disputes in the Caspian Sea
stalled progress. Prospects also were damaged by public anger on
the part of Turkmenistan's president, Saparmurat Niyazov, against
Turkey for proceeding with Blue Stream.

 The demise of its pipeline means that Turkmenistan will probably
sell its gas to Russia, increasing Moscow's control over supplies
in the region, or to Iran, both prospects that dismay American
officials.

 Russia may also use the Blue Stream line to sell gas from
Turkmenistan and Kazakhstan to Turkey and southern Europe, Zeyno
Baran, an analyst at the Center for Strategic and International
Studies in Washington, said in an interview.

 "Russian policy is to maintain and even increase its control over
the transportation networks in and out of the Caspian as well as
Turkey and Europe," Ms. Baran said.

 Not everything has gone Russia's way. American diplomats were
heartened in March when Turkey agreed to buy gas from a new field
in Azerbaijan. The gas is expected to arrive in late 2004.

 Blue Stream has run into its own difficulties. The project is a
year behind schedule and has been caught up in an investigation of
corruption at Turkey's Energy Ministry. Fifteen people, including
former senior government officials, have been charged with bribery
in contracts unrelated to Blue Stream. 

 Energy Minister Cumhur Ersumer, a key figure in Mr. Yilmaz's party
who negotiated the Blue Stream deal, was pressed into resigning
after the scandal, though he was not accused of wrongdoing.

 Prosecutors confirmed that they were looking into aspects of Blue
Stream, including the no-bid contract to build the Turkish part of
the pipeline and a $52 million advance payment to contractors close
to Mr. Yilmaz's party.

 Despite the controversy, the land section from Samsun to Ankara is
complete, and work is expected to start soon on the undersea
segment.

 To lay the line in the Black Sea, Gazprom formed a partnership
with Eni S.p.A., the big Italian energy company, and its Saipem
construction unit. 

 The deepest pipeline to date is 5,000 feet in the Gulf of Mexico,
but Eni executives said they were confident their giant offshore
platform can lay the pipe at 7,000 feet. They also developed a
special coating to withstand the corrosive hydrogen sulfide
concentrated on the sea bed.

 "We are 100 percent sure we will not fail," Stefano Bianchi,
general manager of the project for Eni, said in an interview.

 Even with Blue Stream gas, Turkish officials said they needed
multiple suppliers and pointed to the March agreement to buy
Azerbaijani gas as an example. They also dismissed the idea of
Russia's cutting off supplies for political reasons, saying it
would be too damaging to Moscow's economic interests.

 Russia demonstrated its willingness to use gas for political
leverage last winter. Much of Georgia went dark when Moscow stopped
the flow to underline its demands to keep military bases there. The
gas resumed after Georgian officials pleaded with Moscow, and a
company with close links to Gazprom is now negotiating for a stake
in Georgia's gas distribution network.

 Privately, American and European diplomats speak of concern about
Russia's renewed drive to exert control through such bare-knuckle
energy tactics rather than military intervention. For their part,
the Russians view United States policy as an effort to weaken their
influence in the region. Increasing gas sales is also vital to
Russia's efforts to rescue its own beleaguered economy.

 Americans counter that their intention is to promote economic
cooperation and independence.

 The Americans won a major round last month when the companies
involved in a pipeline to carry oil from the Caspian port of Baku,
Azerbaijan, to Ceyhan on Turkey's Mediterranean coast decided to
proceed with the next phase. 

http://www.nytimes.com/2001/06/08/world/08CASP.html?ex=993025697&ei=1&en=cfb6357e88a9c719

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