Baku-Ceyhan: the geopolitics of oil

Chris Smith
16 August 2005

It's early morning in Georgia's Borjomi valley, and the fog is unforgiving, a pure, grey veil over the rocky hills. At the top of a steep dirt road, a lone figure dressed in a black uniform peers down through the mist. He is guarding the Baku-Tbilisi-Ceyhan (BTC) pipeline, which snakes up the mountainside and disappears into the earth next to his makeshift hut.

The man in black's name is Aleko. A stocky type who never quite meets your eyes, he's nevertheless happy to have visitors. He tells us he hasn't seen the sun in two days.

"In addition to the pipeline, I protect the equipment and petrol from thieves", he says, gesturing toward the construction equipment dug into the mud all along the ridgeline. "I'm here from sunrise to sunset. At night, Spetsnaz (special forces) take over."

Also in openDemocracy on Georgia’s “rose revolution” and its aftermath, see our “Caucasus: regional fractures” debate. Among the highlights:

George Hewitt, “Sakartvelo: roots of turmoil” (November 2003)

Alexander Rondeli, “Georgia: a rough road from the ‘rose revolution’“ (December 2003)

Nino Nanava, “Mikhail Saakashvili: new romantic or modern realist?” (December 2003)

Sabine Freizer, “The pillars of Georgia’s political transition” (February 2004)

Neal Ascherson, “Tbilisi, Georgia: the rose revolution’s rocky road” (June 2005)

See also Caspar Henderson’s tracking of Baku-Ceyhan – and BP’s replies to his comments – in his round-the-world Globolog column

If you find this material valuable please consider supporting openDemocracy by sending us a donation so that we can continue our work and keep it free for all

Men like Aleko can be found at lonely sites all across this former Soviet state in the heart of the southern Caucasus. The need for security here makes sense: Georgia – even after its unifying “rose revolution” of late 2003 – is an unstable place, beset by poverty, corruption and on-again, off-again secessionist wars in South Ossetia and Abkhazia.

The $3.6 billion, 1,768 kilometre pipeline – which began filling in Azerbaijan on 25 May 2005 – cuts straight through the hills here, on its way from the Azeri oil fields in the Caspian sea to the Turkish port of Ceyhan, on the Mediterranean, for shipment to the west.

Run by the US-British oil giant BP on behalf of a consortium of oil companies (called the BTC Pipeline Company) and financed partly by the World Bank, the pipeline could carry enough to fill a million barrels of crude oil each day. It is the biggest development project Georgia has ever seen, one that its cheerleaders hope will lift the country out of destitution.

It may also, however, be a disaster in the making. The pipeline runs through the outskirts of the only national park in the Caucasus and within sixteen kilometres of the Borjomi springs, a major aquifer and source of Borjomi mineral water, the Evian of the former Soviet imperium and one of Georgia's single largest exports. Landslides and earthquakes are common here, and technical troubles and corruption have plagued the project.

If there is an oil spill, says Manana Kochladze, founder of the watchdog group Green Alternative and winner of 2004's prestigious Goldman prize for environmental activism, "We can just say that we will never clean it up." Given the pipeline's expected 40-year lifespan, there is plenty of time for things to go wrong. The precedents aren't encouraging: in 2003, sabotage caused a 100-ton oil spill in a smaller pipeline that crosses Georgia.

But the Georgian government views the project as a necessity. The country has been in freefall since gaining independence from the Soviet Union in 1991, when the economy collapsed, corruption soared and gangs masquerading as politicians grabbed the levers of power. Kidnappings and murder skyrocketed, and the central government lost its mini-wars in South Ossetia and Abkhazia, leaving the country fragmented and perpetually unsteady.

Now, twenty months after the non-violent overthrow (backed by the United States) of the regime of former Soviet boss Eduard Shevardnadze, things have progressed from desperate to just critical. Crime is still high, and electricity is a touch-and-go affair. Tbilisi has recovered control of the southwest province of Adzharia, but Russia guarantees the de facto independence of South Ossetia and Abkhazia with money, weapons and diplomatic cover.

Pipeline politics

The pipeline's prime mover, the United States, sees the project as a key part of its energy security strategy. It's estimated that the Caspian holds 3-4% of the world's oil supply – enough to soften the shock of a disruption to middle eastern sources – and almost any other route would have to pass through Russia or Iran before it reached Europe and America.

Despite its volatility, Georgia offers a politically acceptable alternative. "Our common security interests, our commercial interests, and our interests in peace and prosperity will be strengthened with each length of pipe laid along this line," read a 2002 statement from George W Bush, who followed up with a tumultuous visit to Georgia in May, two weeks before Baku-Ceyhan opened.

With oil prices near all-time highs, Iraq in chaos and Saudi Arabia pumping at close to capacity, the long-awaited pipeline's timing couldn't be better. For the United States, "any new source of supply coming on the market is good", says Laurent Ruseckas, a fellow at the World Policy Institute and former director of Caspian research at Cambridge Energy Research Associates.

While the pipeline won't bring much money into Georgia's coffers in the short term, supporters hope it will spur western investment – a signal to the world that Georgia is open for business. Natalia Antelava, the journalist who has covered the project in the greatest depth, says that if all goes well the pipeline will be a symbol of Georgia's recovery. "It's the fact that someone actually came in, built something in Georgia and it's up and running now", she says. "The significance for the investors is sort of, 'this works. Something else can work as well’."

Georgia also believes the pipeline has strategic benefits. In the words of Alexander Rondeli, head of the Georgian Foundation for Strategic and International Studies, the pipeline is "a serious instrument of becoming less dependent on Russia."

American military involvement is crucial to that independence. In 2002 the United States stationed troops at an old Soviet military base outside Tbilisi, the country's graceful capital. Officially, the marines are there to train Georgia's army in counter-terrorism techniques – Chechen guerrillas have used the remote Pankisi gorge as a launching pad for attacks on Russian troops, and the Bush administration has alleged (albeit with little evidence) that international terrorists hide out in the gorge.

Unofficially, it's generally acknowledged that the marines are in Georgia simply to train a few crack battalions of troops for whatever challenges they might face – and that includes protecting the pipeline (hundreds of newly-trained Georgian soldiers are also serving in Iraq). Additionally, the United States has poured millions of dollars in state-of-the-art equipment into Georgia. All of this largesse, Rondeli says, "will change the security environment of the whole south Caucasus."

Heidi Zeiger contributed valuable reporting to this article.

Heidi’s own website is here

Georgian grace

Indeed, the pipeline is just one part of the United States strategy for central Asia, according to John Pike, director of GlobalSecurity.org, a Washington-based strategic research institute. "A guiding principle of US policy over the last decade has been to enter into the security space of the former Soviet Union, and to discourage the Russians from asserting themselves", he says. Add in oil politics and the global war on terrorism, he continues, and you have a potent brew.

For this link to the west, Georgia is willing to risk everything. Desperate to get the oil flowing, the government cut corners and allowed BP to do as it pleased. Washington, meanwhile, has pushed to get the project on line as quickly as possible; last year, top Bush administration officials reportedly dressed down Georgia's new president, Mikhail Saakashvili, for briefly halting construction. As a result, critics say, the pipeline is an accident waiting to happen – poorly planned, shoddily constructed and riddled with corruption. "We will be very lucky if nothing happens", Kochladze says.

BP says it has done everything by the book, and that Georgia's fragile Borjomi valley is in no danger. When asked if the company would build the same pipeline in the west, the project's outgoing Georgia general manager, Ed Johnson, says: "Why not? This pipeline is built to the highest technical standards. I would undoubtedly build this pipeline in Europe if there was a market for it."

How Borjomi was lost

Problems, however, were soon evident. A series of Dutch studies commissioned by Georgia's ministry of environment was severely critical of BP's environmental and social impact assessment, concluding that alternative routes hadn't been properly explored, and the potential damage to Borjomi hadn't been analysed adequately.

Georgia’s government and the oil consortium dismissed many of the commission's concerns, citing time constraints. "This is the procedure that should be followed according to international standards", the commission wrote, referring to the route selection process, which called for more extensive study. "However, the commission observed that as a result of the strict planning ... a decision on the routing should be taken in the short term."

In other words, time is money. "There were no alternatives discussed. They just said, 'We'll go this way,'" says Nana Janashia, executive director of the Caucasus Environmental Network, one of the country's leading independent non-governmental organisations.

Georgians tell a particularly revealing story about the pipeline's approval process. It was late 2002, and Azerbaijan and Turkey were onboard with the pipeline, as was Washington. Georgia's then environment minister, Nino Chkhobadze, had refused to rubber-stamp the route through Borjomi. Pressure was building: earlier that month, David Woodward, president of BP Azerbaijan, had written to Eduard Shevardnadze urging him to close the deal.

One November evening, the environment minister went on TV and insisted again that she would never agree to the proposed route. Evidently, that was the final straw: at 3 am that night, Chkhobadze was summoned to the president's office. She emerged a few hours later, squinting and maybe in tears, according to witnesses. In a triumphal radio address a few days later, Shevardnadze ascribed most of the objections to the pipeline route to "excessive emotions (and) selfish attitude."

Thus was the route through Borjomi approved. As Natalia Antelava says: "The Shevardnadze government was so desperate for this to happen that they simply didn't care how it was done, as long as it was done."

Zaal Lomtadze, as deputy minister of environment, had worked most closely with BP, concedes the point. "The route is not the best one," he admits. "But it should have been [decided] six years ago." Moreover, his ministry never really had much of a say in it anyway: "The decisions were taken before the environmental side of this project was even explored."

There have been serious construction problems, too. According to a study carried out for BP in 2004, 26% of the joints on the pipes in the Georgian section of the pipeline were cracked. BP shrugged the cracks off as an easy fix, but questions continue to surface about the coating's long-term safety. Derek Mortimore, a former BP consultant and corrosion expert who examined the coating, wrote in a sharply critical report to BP, "We are specifying material and application that is not 'best industry practice' or even 'normal industry practice'; we are in fact completely out on a limb." Mortimore didn’t last much longer.

And then there's corruption. BP has committed millions to infrastructure projects and compensation for land lost to the pipeline, but corruption here is endemic – last year, Transparency International ranked Georgia one of the world's most corrupt countries, just a few spots behind Nigeria – and it's debatable how much of this money ever trickles down to the intended recipients. Village headmen have run off with hundreds of thousands of dollars in compensation money, go-betweens have fleeced would-be pipeline workers for "hiring fees" and mafia types have extorted money from landowners.

In keeping with World Bank guidelines, BP is required to carry out a variety of community improvement projects – building roads, say, or water treatment facilities – for many villages along the pipeline route. Tadzrisi, a cluster of A-frames and weathered wooden homes in the mountains above Borjomi, lies within a mile of the pipeline. BP is supposed to build a new road here and fix the town's rickety water system.

Many villagers are unimpressed. "It's like a big farce", says Guliko Arevadze, the 57-year-old owner of the general store, a tiny building made of raw plywood sheets. "They're not fulfilling their promises. They're not doing anything for us."

David Gogoladze, a lanky, chain-smoking farmer, blamed Georgian middlemen for the broken promises. "It's actually Georgians that are cheating us", he said, his hand chopping the air for emphasis. "I'm sorry to say that, but it's true."

The potential economic damage to the country's single largest export, Borjomi mineral water, is just as troubling. Georgian Glass and Mineral Water Co., the maker of Borjomi mineral water, is the biggest employer in this down-at-heels region of thick forests and rundown spa towns. With a 35% annual growth rate, it is one of the most successful private companies the former Soviet states have produced.

One of the company's factories, set at the end of a road lined by rusty lampposts and leafy trees on the outskirts of Borjomi town, was just an ailing Soviet state business when the company bought it in the 1990s. Now, workers in white coats man state-of-the-art bottling facilities, churning out the strangely salty water that accounted for 7% of Georgia's total exports in 2003.

A done deal

Badri Japaridze, the company's vice-president, calls the decision to route the pipeline through Borjomi a "big mistake", but there was nothing he could do about it. Japaridze worries that the very idea of an oil spill – never mind an actual one – will hurt his company's bottom line. "The mineral water business is a perception-based business," he says. "In general, when you are seeing on TV that the pipeline will endanger this pristine area, it's not nice [for business]."

He has reason to worry. In 2002, the French water company Danone spiked its potential investment in Borjomi, declaring that "we cannot proceed with the evaluation of this project unless such a threat ... has been removed."

What's done is done, though, and all that's left is to sit back and see if disaster comes. As Zaal Lomtadze says: "Unfortunately, it is fixed, and you cannot go back. We cannot change past agreements."

Back at the construction site in the clouds, Aleko the guard tells us about his work. He's not allowed to read or listen to music, he explains, as it might distract him from his duties. He doesn't mind the rules, really: at least he's got a job.

"Sometimes", he adds, "I steal a little sleep."

A few minutes later, the fog begins to clear, rolling back over the mountain to reveal the valley below. The land is lush and mostly rural, the roadside dotted with produce stalls and decrepit gas stations, the Cyrillic inscriptions peeling from their once-gleaming signs. From here, you can follow the pipeline's progress down the mountain and across the valley's green folds, before it eases into the next set of hills on its journey to the west.

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