Baku-Supsa (900 kb/d) | Cost / b |
Lifting costs at AIOC | $5.00 |
Pipeline to Supsa | $0.68 |
Georgian Transit Fee | $0.43 |
Shipping to Rotterdam, LR-2 | $1.23 |
Subtotal | $7.34 |
Given the expense involved several key risks must be considered. One such risk is the conflict between Azerbaijan and Armenia over Nagorno-Karabakh, an ethnic Armenian enclave within Azerbaijan. Home to 160,000 people, 95 percent of whom are Christian Armenians, it is the size of Delaware. To the west of the enclave lies Armenia, less than five miles away at the nearest point. Iran is approximately 15 miles to the south.
Full-scale war broke out between Azerbaijan and Nagorno-Karabakh in 1991, after the ethnic Armenians in the enclave (a.k.a. Karabakhis) demanded independence or the absorption of the region into Armenia. The war is now the longest-running conflict in the former Soviet Union. The Karabakhis, with the help of Armenia, fight for self-determination and independence from Azerbaijan; the Azeris fight for the territorial integrity of their country.
An estimated 35,000 soldiers and civilians
have been killed, and one million others, now largely living in the Azeri
countryside, have been displaced from their homes in the struggle. The
territory stands as a devastated war zone subject to an economic blockade
by Turkey and Azerbaijan that has resulted in
severe shortages of food and medicine. Ground assaults, shelling,
air raids, and heavy artillery have been used by both sides. Although
a Russian-mediated cease-fire has been in effect since 1994, over 400 people
still die each year on the front lines.
A diplomatic team from Russia, France, and
the United States has been trying to resolve the
Nagorno-Karabakh dispute. They want the enclave returned to Azerbaijan
but to give the Karabakhis “maximum possible autonomy.” Armenia has rejected
this, vowing never to allow Azerbaijan to rule there again. The question
of how and where to settle the refugees remains unanswered (see US legislation
Section
907).
The Baku-Supsa pipeline skirts the enclave itself and other Armenian-occupied territory as it exits Azerbaijan and enters Georgia. Armenians, especially extremists living in the Javakheti region of south-central Georgia, have talked about interrupting this flow of oil out of Azerbaijan. Further, the Baku-Supsa route does not address the problem of the Bosporus. If Turkey shut the area down as the result of war, for example, there would be no way to get the oil to the West. A pipeline that bypasses the Bosporus may have to be built in addition to a Baku-Supsa MEP (Main Export Pipeline). If the Nagorno-Karabakh conflict is resolved soon, an alternative pipeline could conceivably run through Armenia and the areas around Nagorno-Karabakh.
AIOC is poised to make a decision on a MEP for late oil, but there are a number of considerations, both political and economic, that have led to delays. Besides an expanded Baku-Supsa line, the other main proposal is a Baku-Ceyhan line.