IMPLICATIONS OF THE FAILURE OF THE TRANS-CASPIAN GAS PIPELINE -

Created: 7/26/2000

OCR scan of the original document, errors are possible

Implications of TCGP Collapse

The collapse of Ihe Trans-Caspian Gas Pipeline (TCGP) project will change regional dynamics and enhance the position of Azerbaijan at the expense of Turkmenistan, but will not retard momentum on other US-supported east-west energy ttansporlatjon routes.

A refocusing of interest on exports of Azerbaijani gas to Turkey might even provide additional momentum for the Baku-Tbilisi-Ccyhan oil pipelinehared right-of-way and some potential joint facilities would reduce Ihe costs of both projects.

stands to lose the most from TCGP's failure; it is at risk of

becoming economically and politically isolated and will be less able to balance pressures from Russia and Iran. While Niyazov can mitigate future economic pressures by selling gas lo Russia's Gazprom, TCGP's disappearanceiable option has robbed him of his bargaining leverage on price, and cooperation with Russia couldenewed dependency on Russia.

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and Tehran probably view TCGP's collapseetback to VS effortsan Independent route for Turkmen gas exports and, moreictory for theirlimit VS influenceegion each regards as its rightful sphere. Although the project'shive reinforced regional perceptions that Russia will remain the heavyweight power,and Tehran's levers are limited

As with Turkmenistan, other countries in the region remain wary of Russian and Iranian influence and intentions and carefully guard their sovereignty.

Turkish officials have made it clear that they do not want to increase their gas dependence on Russia and Iran beyond the current plans for the Blue Stream and Iran-Turkey pipelines.

will be the clearest winner. Buoyed by ita newfound gas resourcesfrom ihe constraints of cooperating with Turkmenistan on TCGP. Baku is pursuing anexport pipeline for its own considerable gas resources.ine, whether it transited Georgiscould be completed byquickly thanwould provide Bakunew revenue. In addition to the increased revenue, an independent gas pipeline lohelp anchor Azerbaijan to thecritical political goal forfurtherperception of being an indispensable hub for Caspian energy resources.

ecent visit to Baku, Turkish President Sezer agreed that Turkey would ncgolialo to buy Azerbaijani gas from Shah Deniz field. Working groups have been formed for that purpose.

The proposed incremental volume buildup startingillion cubic meters per year (bem/y) with the potential to growould work in Turkey's favor.

Timing, however, for this action iselay in Azerbaijan's pipeline project would enable Russia and Iran toirm foothold in Turkey. Russiaeenevidenced by its tactics incould undercut Azerbaijan's prices,elayed Azerbaijani pipeline uneconomical.

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The implications fordestination for TCGP gaspositive, turkey is alreadyevere gas deficit and would benefit from the quicker completionas line from Azerbaijan.

Turkey remains hopeful thai TCGP can somehow be resurrected and intends to keep the door open for Niyazov.

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