Articles

Washington Report on Middle East Affairs, May 2004, pages 34, 41

Special Report

	An oil tanker passes under the Bosporus bridge at Ortakoy (photo C. Slaney).

A DECADE OF efforts by Washington to coax Caspian crude oil toward Turkey and away from Russia and OPEC member Iran is creating a chokepoint at the Bosporus, through which oil shipments must pass on their way to market. Unable to ship their rapidly increasing output to European refineries, oil producers might still opt for the shortest and cheapest route—through Iran.

Friction over navigation through the Turkish Straits goes back to a time when Ottoman sultans occupied ornate palaces overlooking the Bosporus, and Czarist ministers negotiated Russian access to the Mediterranean. Freedom of navigation between the Black Sea and the Aegean eventually was regulated by the 1936 Treaty of Montreux, still in force today.

Yet when Churchill, Truman and Stalin met at Potsdam in 1945, they agreed that the regime governing the straits was inadequate and needed replacing. According to minutes from their meeting, “The three Governments recognized that the Convention concluded at Montreux should be revised as failing to meet present-day conditions.”

The onset of the Cold War thwarted any progress on the issue. At maritime conferences before and after the Second World War, naval power and navigation rights set the agenda. Environmental protection was an unknown concept and oil spills involved salad dressing. Today, environmental concerns are driving Turkish policymakers to restrict oil shipments through the straits.

Turkey is keen to become an “energy bridge” between the new oil fields of Central Asia and Europe. It wants that energy to flow from east to west, however, not north-south through the Bosporus. Along with the government in Ankara, environmental activists and Istanbul residents claim traffic through the straits already is at maximum capacity. They oppose millions more tons of crude oil moving down a narrow channel at the heart of a city of 13 million people, the country’s commercial heart. “No European country would ever agree to allowing that kind of sea traffic through their own downtown,” said Ozgur Gurbuz, Mediterranean energy campaigner with Greenpeace Turkey. Russia, which claims to be the largest user of the straits, feels threatened by the Turkish stance.

Oil and gas production in the Caspian Basin is set to soar in the coming decade, with the exploitation of proven oil reserves expected to double from present levels, reaching 3 million barrels daily by 2010. At the same time, Russian oil companies are setting new records for production and export. Analysts predict that, by the end of the decade, Russia could be pumping 10 million barrels of crude daily.

Responding to Turkish comments about placing limits on oil tankers, Russian Deputy Foreign Minister Victor Kaluzhny told a recent conference in Istanbul, “Don’t let this genie out of the bottle, this is a very dangerous path.”

Senior Turkish government officials in the room displayed remarkable sang froid after this undiplomatic lecture. Dr. Hilmi Guler, Turkey’s minister of energy and natural resources, encouraged his audience to “look out of the windows and see how breathtaking the straits are from here.”

People who used the coffee break to admire the view were delegates to the second “Caspian-Black Sea Oil and Gas Conference,” a three-day gathering held in late February for policymakers and top executives from the international energy sector. Government ministers from Central Asia and Russia came to promote their proven reserves and project output figures, but in session after session talk returned to the bottleneck being created less than a mile from the conference center.

The key element of a strategy to move oil through Turkey but not through the Bosporus is a pipeline from Baku in Azerbaijan, through Tiblisi, to Turkey’s Mediterranean port of Ceyhan. According to the BP-led consortium building the pipeline, called the BTC, the total investment is $3 billion. Critics of the project, however, say the cost is closer to $5 billion. Russia has criticized the BTC as an uneconomical folly and claims Turkish restrictions on tanker traffic through the straits are merely an attempt to justify its construction. But while Washington and Ankara were collecting signatures from 78 parties on thousands of documents to create the BTC agreement, Caspian producers were rushing crude to market through the Black Sea to the Bosporus. In 1996, according to Turkish government figures, 60.1 million tons of oil were shipped through the straits. Last year that amount passed the 134 million ton mark, and is predicted to increase by at least 50 percent before 2010.

Turkey’s response has been to introduce new controls on oil tankers. Since October 2002, bigger ships can make the 18-mile passage only during daylight hours, while traffic from the other direction is suspended. The inauguration of a new network of radars and surveillance cameras earlier this year was expected to ease congestion, but seems to have produced the opposite result. “The system is not a tool to improve the traffic flow, it’s there to apply the Turkish Straits Regulations and to see that all comply,” said Capt. Cahit Istikbal, an Istanbul maritime pilot.

This winter, congestion was further exacerbated by several periods of foul weather and a series of accidents which resulted in the straits being closed three times. Waiting for a slot to transit the straits has added up to 20 days to a voyage to load crude oil at Black Sea terminals, representing serious losses for tanker operators. And the situation could become significantly worse, noted Hakki Akil, one of Turkey’s top diplomats. “When Russian oil companies are fully engaged and the Caspian Pipeline Consortium starts transporting oil from Kazakstan to the Black Sea in full capacity, traffic is most likely to become paralyzed,” he warned.

The Turkish solution to the Bosporus bottleneck is to promote pipelines, like the BTC, which bypass the straits. At least three other pipeline routes are being promoted: from Turkey’s Black Sea port of Samsun to Ceyhan; from Constanza in Romania, across the Balkans to Trieste; and a shortcut between the Bulgarian port of Burgas and Alexandropoulis on the Aegean. Given the projected growth in crude output in the region, even if all these plans could be implemented it is unlikely they would provide sufficient capacity to solve the problem. The BTC pipeline with a capacity of 50 million tons yearly can barely accommodate increases realized in Caspian oil production in the years since it was first proposed.

As energy consultant John Roberts points out, significant quantities of crude oil moving through the straits are actually going north into the Black Sea. “Ukraine remains a large importer of crude from the Middle East,” he said. “We need to make sure all the energy trading in the region is done on a commercial basis instead of relying on political agreements to buy oil.”

Efforts to open Ukraine’s energy market to oil entering the Black Sea from the Caspian states would reduce tanker movements through Istanbul.

Mohammed Nejad, an Iranian deputy minister of petroleum, believes Caspian states will eventually have no choice but to cooperate with Iran to successfully export their newfound wealth. “The Caspian Sea region is not another Persian Gulf—the cost of producing Caspian oil is high and therefore it is important to reduce transport costs as much as possible,” he said.

With minimal investment, oil can be shipped to Iran’s Caspian Sea terminal at Neka. Iran has a ready market for crude at refineries in Isfahan and Arak. The balance in crude, less an agreed commission, would be delivered to buyers from Iranian stocks at Gulf ports, a practice known as oil-swaps. One Russian company already is experimenting with this route, and Tehran, confident that oil eventually will flow by the cheapest route, has begun an ambitious tanker building program.

Christopher Slaney is a free-lance journalist based in the Middle East.

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