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Friday, Jun 03, 2005

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Will the Baku oil pipeline benefit locals?

Paul Brown

The Baku-Tbilisi-Ceyhan pipeline has begun pumping oil. But will Azerbaijan benefit from the wealth that will follow?

THERE ARE 800 manmade lakes on the edge of the Caspian Sea in an area that is known simply as Twenty. The lakes contain oil, tar and raw sewage as well as water — a mixture that in the summer months provides potent fumes and a breeding ground for malarial mosquitoes.

On parts of the site — which, established in 1847, is the oldest oil field in the world — a few remaining productive wells still work, with "nodding donkeys" pumping up the last of the oil. A few miles from this suburb of Azerbaijan's capital Baku, in the country's section of the Caspian Sea, a newer story is unfolding.

British Petroleum is developing what it says is a state-of-the-art, nearly pollution-free oilfield that will connect to the controversial but almost complete 1,762-km Baku-Tbilisi-Ceyhan (BTC) pipeline, which stretches from Azerbaijan to Turkey. Last week the oil finally started to flow through the pipe towards the Mediterranean where it will then travel by tanker to the U.K. to be refined and keep Britain's cars and aeroplanes running.

Environment-sensitive

Before arriving at the new sea terminal, the pipeline runs through environmentally sensitive areas in Georgia and has raised concerns about the human rights of local villagers in Turkey.

But BP believes all these problems have been settled and says the pipeline's advantage is that it avoids taking more oil tankers from the Black Sea through the Bosporus Strait. It describes BTC as the largest energy project in the world.

The pipeline will transport a million barrels of oil a day, enough to turn impoverished Azerbaijan into a wealthy country almost overnight. By 2007 it will have an income of $7 billion a year, even if oil falls back from its current price of almost $50 a barrel to a modest $25 a barrel. But despite predictions of untold wealth, there are concerns over whether the oil that will keep the U.K. running will be a blessing or a curse for its country of origin.

Inayat Mehtiyeva, whose shop is a few metres from the nearest oil lake that is fed by raw sewage from houses further up the hill, explains that, so far, no benefits can be seen. She says people rarely pay for the bread from her shop. "There is not much money, we operate a barter system. We swap things. Some people take bread and say they will pay later but they never come back. We really depend on God here."

Along with 80 per cent of the other residents of Twenty, Mehtiyeva is a refugee. She has lived there for 12 years after fleeing from her home in Nagorno-Karabakh, an enclave of Azerbaijan on the border with neighbouring Armenia, during the war between the two countries. United Nations agencies say Armenia still occupies 14 per cent of Azerbaijan, although the Azeri Government claims it is 20 per cent.

Mehtiyeva, whose first name means faith, hopes that one day, with her two sons, she can return home where life was simple but good. "Perhaps the oil money will help, but I do not know how. I know I cannot stay here. At the first opportunity, I will flee."

Hasay Hasanov, a shipyard worker who works next to area Twenty, says his $100-a-month pay is not enough. He is worried that his two children might catch malaria and wants the old oilfield cleaned up, but he does not think he will see any benefit from the new oil money. "What we want is a decent wage — $300 a month — so we can afford more than just paying the rent and buying food."

Benefit or curse?

The World Bank's country manager for Azerbaijan, Ahmed Jehani, is unsure whether the oil will be "a benefit or a curse." He is afraid that other industries will wither away if the country relies on oil revenue alone. Politicians might become less responsive to the needs of the people, he says, because they would no longer rely on them for taxes. Rich resources could also lead to ethnic and other tensions, especially if the benefits are not shared.

Added to this are doubts about whether democracy in Azerbaijan is robust following the country's election in October 2003. President Ilham Aliyev was voted in after the death of his father Heydar, whose giant presidential portraits still appear in their thousands all across the capital.

Furthermore, according to Transparency International's 2004 index, Azerbaijan is one of the world's most corrupt countries. "This is a major concern of the World Bank," says Mr. Jehani. "We need to get accountability in elections, in the assets. There is a deficiency of justice, access to courts, and lack of general transparency."

He is hopeful, however. The Government has set up an oil fund which will publish all the details of money coming in and where it is invested. "This is a shining example of what can be done. Let us hope that temptations to divert money away from long-term investment do not prove too strong," he says.

Not first oil boom

Today's oil boom in Baku is not the first. At the end of the 19th century, Azerbaijan provided more than half the world's oil, and 60 per cent of Britain's oil.

It supplied the cash for some of the most sumptuous Victorian stately homes in Britain, but left Baku with a legacy of oil pollution that the Soviet empire added to and left behind.

As Azerbaijan returns to an oil boom, it will again bolster profits far away, notably those of BP. But the oil from the new fields is expected to last only until 2020, after which time the country will produce just enough for the needs of its eight million people.

Mr. Jehani sums up: "It is a question of whether the money generated from these 15 years of the second oil boom will be invested to turn Azerbaijan into a modern and wealthy state, or whether it will be an opportunity wasted." — © Guardian Newspapers Limited 2004

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Will the Baku oil pipeline benefit locals?