The New Great Game: Blood and Oil in Central Asia [NOOK Book]

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FIRST CHAPTER: Pipeline Poker: Baku's Oil Boom

Vagif Guseinov watches us suspiciously as our driver parks our black Volga next to a monument in the courtyard of his headquarters. "Long live the oil workers!" reads the inscription in Cyrillic letters on the monument, but the hammer and sickle have been removed. Mr. Guseinov, a colossus of a man, mechanically extends his right hand, a veritable bear paw adorned with four or five golden rings. Mr. Guseinov may be wondering why his bosses at central headquarters gave me permission to visit Sandy Island. In the old days, this would have been impossible.

This group of two dozen oil rigs off Azerbaijan's coast, one of the largest in the Caspian Sea, was once guarded like a state secret, and no unauthorized person ever made it across the 4-kilometer dam linking the artificially created island to the shore. In the early 1950s, Soviet engineers constructed a seemingly infinite maze of pipelines, pump stations, and drilling towers on wooden stilts, stretching from Sandy Island far into the open sea, held together by twelve kilometers of roads, likewise on stilts. Today, the giant site belongs to Socar, the state oil company of the former Soviet republic that became independent ten years ago.

Vagif Guseinov, Socar's general director on Sandy Island, has worked in the Caspian oil industry for more than thirty-five years. He has decorated his office, as is advisable for civil servants in today's Azerbaijan, with a total of eight portraits of President Heydar Aliyev. One painting of the former KGB general dates from 1976 and bears the inscription "Shining Son of the People" in Azeri. Six telephones are lined up on the desk, each of a different color.

The building from which Mr. Guseinov rules over Sandy Island is a wooden shack that has been hastily erected by his workers. The director points out the window to a house about five hundred yards away, half-submerged in water. "My old headquarters," he admits. "We built it too close to the shore. Who could have known at the time that the level of the Caspian would rise so much!"

Guseinov gives me permission to visit the drilling rigs, but only at my own risk. "The installations are very old, do watch your step!" The offshore production site is in utter decay. The roads leading out to the open sea look like the aftermath of an intense artillery barrage. Our driver has to steer the Volga precariously around gaping holes, under which dirty, oil-soaked waves splash against the rotting stilts. Pipelines and oil reservoirs have rusted away, while crooked drilling towers of wood and steel are reminiscent of the first oil wells in Pennsylvania in the 1870s. Far off on the shore, the high-rise buildings of Baku are visible through the haze.

We stop in front of what looks like a derelict drilling tower. A set of wooden stairs dangles off the iron bars, leading nowhere. On the platform, surrounded by scattered debris, sits the "Christmas tree," which is what oil engineers call the well's central valve. "Western investors have not shown much interest in Sandy Island yet," Mr. Guseinov comments wryly. "Once some Russians working for Lukoil showed up but they only looked around briefly and never came back." Production has sunk to a level of 150,000 tons a year, a fraction of its one-time volume. However, some 1,600 people still work on Sandy Island. "We will never shut down the rigs even if the wells are depleted. The people need work, full-stop."

The pipes around the Christmas tree hiss and gurgle and suddenly an engineer who accompanies us opens a valve. Out gushes the slimy, brownish crude oil, accompanied by a sweet- smelling stench. A few liters of an estimated 50 to 110 billion barrels that lie hidden beneath the bottom of the Caspian Sea and on its shores form a growing puddle right at our feet. By the time the engineer closes the valve, several liters of crude have already poured out, left to seep through the ground and into the seawater.

Before our departure Mr. Guseinov insists on treating me to lunch at the canteen. On our way there, every worker we pass takes off his hat and bows respectfully to the boss. Women step anxiously backward so as to not stand in our way. "It is payday," Guseinov snarls over his shoulder. In a separate room of the canteen, three waiters serve a soljanka soup, followed by fried "black ducks," shot by workers over Sandy Island the day before. The meat tastes unnervingly of oil. Soon, Guseinov orders three bottles of Russian vodka. He fills our glasses and, in a deep guttural voice, proposes a toast to the oldest man at the table, our Volga driver. Then a second toast, to the deep and unbreakable friendship between Azerbaijan and Germany, a third to international cooperation, and several more in the befuddling socialist phraseology of peace, understanding, and drushba, friendship. As a tribute to the post-Soviet Islamic revival in the Caucasus, Guseinov lifts his eyes briefly to the ceiling before every sip, mumbling a phrase. "I ask Allah please to look the other way when I drink," he explains with a grin. One of the engineers raises a toast-the seventh or eighth-to the general director, the "wisest, most humane, most just and far-sighted boss" that Sandy Island has ever had. Guseinov looks moved.

Then it is my turn. I toast in honor of all foreign companies that drill for oil in the Caspian Sea. Hesitating, the engineers look to Mr. Guseinov, who clears his throat. "It is good that the Americans are investing their money in Azerbaijan," he says curtly. Silence. Suddenly the old Volga driver, who has not spoken a single word all day, says, "Americans have no culture." To enthusiastic nods from his colleagues, one of the engineers adds: "If only they would help us lead a successful war against Armenia." At this point Guseinov intervenes: "Now, now, comrades! That is high politics which we had better leave to the president. We are just simple oil men."

It is already dark when we return to Baku. A cool breeze blows from the water, each gust laced with the odor of petroleum. The day before, the wind came from the south, overland from Persia, bearing the promise of an early spring. Now Siberia sends a cold reminder. The streets lie deserted in the pale moonlight, with only the odd Mercedes limousine or Jeep creeping past. Acacia trees line the rows of wealthy middle class houses from the turn of the century whose oriels and wrought-iron balconies evoke Paris or Marseille. During the day, the streets are busy with groups of men in black leather jackets and ladies in high-heeled shoes window shopping at Cartier or Versace boutiques.

Yet even the nouveau riches and their promenades cannot dispel the impression that boomtown Baku, the new Oil Dorado of the Caspian Sea, is scarcely more than an upmarket shithole. The glittering buildings, expensive boutiques, and picturesque minarets of the old town cannot mask the strong stench of oil that never dissipates, day or night, not even when the wind blows in from the sea. The writer Fitzroy Maclean, then a British diplomat accredited in Moscow who travelled to Baku in the late 1930s, found the town in much the same condition. "Even before you reach Baku, the derricks of the oil wells and the all-pervading smell of oil warn you that you are approaching the town. Oil is the life of Baku. The earth is soaked with it and for miles round the waters of the Caspian are coated with an oily film."1

To make matters worse, Baku's current mayor is a Koran-abiding guardian of public morality. Street cafés are closed and it is rumored that the police have begun to arrest foreign oil executives caught with local hookers. It was not always this way. Baku was once a city filled with promise. The Neftciler ("oil worker") Prospect along the seaside promenade is lined by tall Gründerzeit palaces, their richly ornamented facades decorated with pseudoclassicist pillars. The best architects from across Europe descended on the city during its first oil boom more than a hundred years ago, when more than half the petroleum on the world's markets came from Baku.

On the arid Apsheron peninsula that stretches into the Caspian Sea, petroleum has seeped from the soil for ages. On his journey to China in the thirteenth century, Marco Polo reported of a well near Baku whose outpour, while unsuitable for drinking, could easily be burned. Moreover, Polo wrote, the sticky stuff could be put to good use for cleaning wounds in his camel's skin.

Azerbaijan was originally known as the "land of fire" because of natural fires, fed by gas from the soil, that burned on the Apsheron peninsula. Today, a similar spectacle can be observed in a small village north of Baku. There, a bumpy dirt road leads to the Yanar Dag, the mountain of fire, where the air is heavy with the smell of gas and ten-foot flames shoot out from a sooty limestone cliff. Next to the fire, villagers have set up a couple of benches and tables, where they sit at night drinking vodka until someone throws a rock at the limestone, kicking up a new batch of flames.

From the early Middle Ages Zoroastrian pilgrims, who worship fire as a sign of God, came to these cliffs from Persia, erecting temples around the mysterious holy fires. One such atashgah (temple of fire) still exists north of Baku. Alexandre Dumas described the atashgah he saw during his visit to the Caucasus in the mid-nineteenth century: "We went inside the temple through the gates, which were entirely enveloped in flames. The prayer room with the cupola is erected in the middle of a large quadrangular court; the eternal fire is ablaze right in the middle of the prayer room."2 The flow of natural gas to the fire altar in the temple's inner courtyard has long petered out, so a rather mundane municipal gas pipeline now feeds the eternal flames.

Oil was discovered in Baku in the early nineteenth century, when it was a recently annexed Russian duchy. People who dug up the soil with their hands scooped off the oil that seeped out. Around the early 1870s, a Russian entrepreneur was the first to use machines to drill for crude, and by 1873, some twenty small refineries belched black smoke into the Baku air. That same year, a Swedish chemist named Robert Nobel arrived in Baku. He was the older brother of the factory owners Ludwig and Alfred Nobel, who had become very rich producing arms and dynamite in St. Petersburg and Paris. Robert had gone bankrupt with several companies, and was now working for his brother Ludwig. He was sent to the Caucasus with 25,000 rubles to purchase Russian walnut wood for the production of rifle butts. No sooner had Robert set foot in Baku than he got carried away by oil fever and, without consulting his brother, bought a small refinery.3

Ludwig soon followed Robert to Baku, and the two brothers founded the Nobel Brothers Petroleum Producing Company. In the course of only a few years it replaced America's Standard Oil, owned by John D. Rockefeller, as the world's leading supplier of oil. The Nobel brothers became the oil kings of Baku, and their workers proudly referred to themselves as "Nobelites." By the late 1880s, Nobel wells yielded 23 million barrels of Russian crude every year, more than four-fifths of the American production. Then, as now, the greatest problem was how best to transport the oil from the landlocked Caspian shores to Europe. Initially, it was shipped across the Caspian Sea, up the Volga, then finally to its destinations by train. This was both complicated and expensive. Then, in 1883, a direct railway line was built from Baku across the Caucasus to the Black Sea port of Batumi, which Russian troops had only recently seized from the Ottoman Empire.

The project was funded by the Rothschilds, a family of French bankers. They needed cheap crude for their refineries in Europe and quickly became the Nobels' fiercest competitors. However, when the line was finished, the locomotives were not powerful enough to pull more than six tank wagons across a pass in the Georgian mountains. The Nobels had a solution. With the help of four hundred tons of dynamite from Alfred in Paris, they blew a tunnel into the mountain pass in 1889 and laid a seventy-kilometer-long steel tube. It was the region's first oil pipeline and marked the beginning of the so-called oil wars over global markets among the Rockefellers, the Nobels, and the Rothschilds that, in retrospect, almost appear quaint compared to today's geopolitical struggle for Caspian oil.

Traces of this first oil boom can still be found in Baku. The Nobel villa, a white manor of wood and glass, stands on a hill above the port, in an industrial zone that came to be called "Black City." The terrace from the Nobel estate afforded a landscape of hundreds of refinery chimneys belching acrid black smoke into the sky.

A few miles along the coastline from Black City, which still bears this name today, one reaches hundreds of old oil wells rusting on the shore amid giant pools of shiny black sludge and pinkish water. Several derricks grind painfully up and down while rubbish is strewn everywhere. The ghostly scenery calls to mind World War I photographs of the Passchendaele and Ypres battlefields. Not a single green plant or blade of grass can be found for several square miles in any direction.

At one of the derricks two workers with oil-smeared faces and boots full of holes labor hard to revive a defunct pump. Despite the biting cold, they absurdly use their bare hands to try to loosen a frozen apple-sized screw. Around them, the rolling hills open onto black lakes, surrounded by dead yellow sand. This is the scene of giant blowouts from a century ago, when valves broke under the pressure from below, sending fountains of oil high into the sky. Locals gave them names such as "Wet Nurse" or "Devil's Bazaar," while the biggest among them, a blowout from the mid-1880s oddly named "Drushba" (friendship), gushed oil for five months at a rate of 43,000 barrels a day. Most of it seeped back into the ground, scorching the soil.

Along with the nation's first oil barons, Russia's socialist movement also had its origins in Baku. When the Tsarist regime began to crumble in the early twentieth century, oil workers in Baku repeatedly went on strike to protest against working conditions. One of their leaders was a young Georgian agitator named Joseph Dzhugashvili, later known as Joseph Stalin. In 1901, Stalin, who then called himself by the nom de guerre "Koba" (the irrepressible), organized strikes in Batumi against the Rothschilds and was arrested by the Tsarist police. After his escape from a Siberian labor camp, Stalin continued with his secret revolutionary activities in Baku. "I first discovered what it meant to lead large masses of workers. There in Baku I received, thus, my second baptism in revolutionary combat. There I became a journeyman for the revolution," Stalin later wrote.4

In 1903, Stalin was involved in a massive workers' revolt that started in Baku and spread throughout Russia, leading to the first general strike in the empire. Two years later, during the first Russian revolution, workers deliberately sabotaged industrial sites, setting many oil wells on fire. Bloody ethnic clashes broke out between Azeris and Armenians, and by the end of 1905, two- thirds of all oil wells in Baku were destroyed and the entire oil export business had collapsed. With international investors withdrawing from the city, production never recovered. On the eve of the First World War, the share of Russian oil in the global market dropped to 9 percent. Baku's oil boom was over.

The Great War became the first conflict in world history where oil reserves decided victory and defeat. Ultimately, the German Empire lost the war of attrition in the trenches of the Western front because its war machinery had run out of fuel. In early 1918, the military situation seemed auspicious for the German forces. In March, the Russian revolutionaries who had ousted Tsar Nicholas II but needed troops to combat Tsarist loyalists signed the peace treaty of Brest-Litovsk. The Bolshevik negotiator Vladimir Ilyich Lenin ceded to the Germans the Baltic territories, Finland, and Ukraine. For Erich von Ludendorff, chief of the German general staff, it was not enough. He wanted Baku's oil. Turkish troops, allied with the German army, were already moving toward the Caspian oil wells. Von Ludendorff offered to hold the Turks back in return for direct oil deliveries to the Reich. When Lenin agreed, Stalin sent a telegraph to the Baku commune that had chased out the oil barons and seized control of the city. Stalin's order was to start pumping crude oil. The communards refused.

In July and August 1918, the Turks laid siege to Baku and seized several oil fields. It was a short-lived victory, as a small British detachment pushed north from Persia and liberated the city, denying von Ludendorff desperately needed oil supplies. By the time the British left the city to the Turkish army in September, it was too late for the exhausted Germans, who surrendered on November 11, 1918. Lord Curzon, a member of the British war cabinet and future foreign minister, declared a few days later, "The Allied cause had floated to victory upon a wave of oil."5

The Caspian oil also played a significant role for the Germans during the Second World War. In early 1942 Adolf Hitler ordered his army into the Caucasus as part of "Operation Blue." In order for its motorized units to continue their blitzkrieg in the East and force the Soviet Union to its knees, the Wehrmacht desperately needed fuel supplies from the Caspian. The German offensive literally ran out of gas in the Caucasus mountains. Often the German vehicles were stuck for several days waiting for new supplies. As their tanker trucks were also out of fuel, the Germans transported fuel canisters on the backs of camels. When the Sixth Army was encircled by Soviet troops at Stalingrad in the winter of 1942-43, Hitler initially refused to withdraw his forces from the Caucasus. The dictator reportedly told Field Marshal Erich von Manstein, "It is a question of the possession of Baku. Unless we get the Baku oil, the war is lost."6 Finally, in January 1943, the Caucasus troops were ordered to retreat. Two years later, Soviet tanks entered Berlin.

The end of the Second World War heralded the beginning of a new era for the Caspian oil industry. Soviet engineers constructed the first offshore oil rigs, right off the Baku coastline. This began the career of Khoshbakht Yussifzadeh, the grand seigneur among Baku's oil bosses. The seventy-two-year-old Yussifzadeh is vice president of Socar, Azerbaijan's powerful state oil company. Its headquarters are in an imposing white palace right on Neftciler Prospect, which previously housed the Soviet oil administration for the entire Caspian region before the communist empire's collapse.

The way to Mr. Yussifzadeh's office leads through glass corridors that link the various parts of the palace. The two secretaries in the anteroom ask for patience, as the vice president is still on the phone. Through the door a deep rolling voice can be heard, then a sudden burst of hoarse laughter, and the thunder of a hand smashing flat on a desk. The secretaries smile apologetically, shrugging their shoulders.

Moments later Yussifzadeh calls me in. Behind the huge piles of papers on his desk, he has the appearance of a Spanish don. Though his hair is not yet completely gray, age has drawn deep furrows across his face. Massive tear sacs drop from his warm and alert eyes. Large geographical maps cover all of the walls, most of them of the Caspian Sea. On top of a cupboard stand dozens of ampules filled with samples of crude oil.

"For forty-nine years I have been in this business, I have lived for oil," says Yussifzadeh as he takes a sip of green tea from his cup. "The Oily Rocks and I grew old together." The Oily Rocks were the most daring offshore project in the Soviet Union after the Great Patriotic War, as the Russians refer to World War II. About twenty-five miles off the Baku coast, geologists had discovered evidence of great oil resources. "We wanted to have them but, you see, we had no experience in how to start drilling in water." The engineers gathered seven old barques and linked them together with steel bridges. These were the shaky beginnings of an offshore oil rig that was to grow into a veritable city on the open sea. Soon, more than a hundred kilometers of roads linked six hundred oil wells, with thousands of workers moving into blocks of apartments. Following his geology studies, Yussifzadeh spent the first twelve years of his career on the Oily Rocks. "For us, it was a brave new era. We were pioneers, explorers. After work we went to the cinema or bars. You see, there were also many women there who worked in the laboratories or the canteen."

Yussifzadeh made money, the first good cash after many years of poverty. He grew up without his father, who had been killed during the Stalinist purges of the 1930s, while his mother raised him and his two siblings single-handedly.

"Then I was allowed to go to university, and on the Oily Rocks I earned 2,900 rubles, with benefits even 5,000 rubles. At the time, that was fantastic!" Yussifzadeh climbed the career ladder, becoming chief geologist for the entire Caspian Sea by the 1970s. The career move coincided, however, with a decision by the Soviet leadership to neglect oil production in this region and instead to focus on strategically more convenient resources in Siberia and Kazakhstan.

Despite this change of policy, Yussifzadeh went ahead with test drillings for new oil fields along the entire Caspian coast. "Most of the oil fields off the Kazakh coast that are causing such brouhaha these days were originally discovered by me." He jumps up from his chair, walks over to a cupboard and opens it. An avalanche of rolled-up maps spills out. Holding a particularly ruffled-looking map with a triumphant expression on his face, he wipes the dust off the northern half of the Caspian Sea. "Up here it says 'Kashagan,' does it not?" In the summer of 2000, geologists discovered a giant oil bubble in Kashagan, with an estimated volume of thirty billion barrels, presumably one of the five largest oil fields in the world. The find caused a sensation on the oil markets around the world, and lies at the core of all debates about pipelines in the Caspian region.

"I knew it at the time, that there would be a lot of oil down there." Yussifzadeh's problem was that the site was part of a nature reserve. Only the ministry of fishery in the capital was able to grant an exception for drilling. "So I flew to Moscow and applied for an authorization to do a test drilling at Kashagan. The lady colonel in charge of the matter declined the request categorically. 'Only over my dead body!' she said. Today the lady colonel is dead, and the foreign corporations are drilling at Kashagan. No one mentions the environment anymore."

With the Soviet Union's collapse in late 1991, Azerbaijan became an independent republic. The nation of seven million almost immediately slipped into chaos. Several governments ousted each other in a succession of coup d'états, and a totally demoralized Azeri army lost the bloody war with Armenia over the predominantly Armenian-populated enclave of Nagorno-Karabakh. In 1993, Azerbaijan, bereft of 15 percent of its territory, was on the verge of falling back under Moscow's control. That was when Heydar Aliyev stepped back into the political spotlight. A distinguished KGB general and member of the Politburo, the Azeri had for decades been one of the most powerful communist leaders of the Soviet Union. Nicknamed "the fox" by his friends and enemies, Aliyev saw that in nearly all post-Soviet republics, former high-ranking communist officials were back in power. So it came as no surprise when the sublime tactician was elected president of his home country in October 1993.

Aliyev quickly realized that the only chance for Azeri independence-and for keeping his power-lay in the oil business. He made his son Ilham, a notorious playboy, second vice president of Socar. With the oil business firmly in the hands of the presidential family, no decision in Socar has been made without direct consent of the Aliyevs.

In Yussifzadeh's office, just as in Vagif Guseinov's office, there are no fewer than seven photographs of Aliyev. In his eight years of rule, the autocrat has orchestrated a true cult of personality. Pictures of the leathery, sphinxlike Aliyev stare from the walls in every office across the country. The paintings with the caption "Shining Son of the People" show an amazingly rejuvenated president emitting red and yellow rays of light, while in actuality, the eighty-year-old Aliyev is suffering from cancer and has long since chosen his son Ilham to succeed him as president.

After Aliyev seized power, he wanted to free his country from a patronizing Kremlin that, with Aliyev's past in mind, had expected a pro-Russian policy. The Azeri had other ideas. The country lacked the money and the necessary technology to exploit its resources off the coast. So Aliyev opened the country's oil fields to foreign investors. This ensured that Western governments, in particular the United States, would have a continued interest in an independent Azerbaijan. As early as the spring of 1994, Aliyev nominated a team of experts, led by his son Ilham, to negotiate a good deal with interested oil companies.

Yussifzadeh, a longtime friend of Aliyev's, took part in the negotiations. "We made a public invitation to tender, and six, later twelve, companies showed interest, the most avid by the American company Amoco and by British Petroleum." A suitable venue had to be found for the talks, but at the time Baku could not offer a single hotel with Westernized amenities. There were also concerns for the security of the oil executives. "Many people in Azerbaijan were opposed to us reaching an agreement with foreigners. And of course, the Russians objected as well." In Moscow, the dispatches from Russian agents in Baku were read with growing concern. Instead of relying on his old Soviet connections, Aliyev revealed himself almost overnight as a glowing Azeri nationalist bent on snatching his country's raw materials from Russian control. Rumors of an impending Moscow-backed putsch spread throughout Baku.

The negotiating partners agreed to convene first in Istanbul during the summer of 1994. "We were all very excited," Yussifzadeh remembered. "After all, it was the first time ever that a delegation went abroad without Russian company-previously that had been unthinkable." The initial meeting, however, was spiked with great mutual distrust. "Across the table from us were suddenly the very same people who only a few years before had been our capitalist enemies," says Yussifzadeh, laughing out loud at the memory. "At first we felt insecure and had many doubts. To us, those oil bosses from America seemed like Gypsies who were only waiting for their chance to take us for a ride."

Before that meeting, Yussifzadeh had rarely dealt with Americans. "My idea of them was still very much influenced by all the propaganda. Once, in the 1970s, a delegation from the United States came on a visit to Baku, and I was surprised by just how nice and normal they were. They gave me a bottle of Buffalo whiskey." A second present still covers one of the walls in Yussifzadeh's office: a map of the world, several square meters in size. It is strictly geographical, without any political borders.

After the first contact the negotiations moved to Houston, Texas, the unofficial capital of the American oil industry. "Those skyscrapers made of glass, all that luxury in the city-it was somewhat different from home," Yussifzadeh recalls. The Baku delegation was booked into a five-star hotel. Yussifzadeh insists that, in spite of rumors of corruption, not one generous gift was offered to influence the Azeris' decision. "I wish somebody had given me some money! But all I got was souvenirs, pens and similar stuff." Yussifzadeh concedes that other members in the team may have had different experiences, but he had no knowledge of personal misconduct. A far more pressing matter than bribery was Moscow's insistence that the Azeris not conclude any treaty as long as property rights in the Caspian Sea remained unresolved. Aliyev would not be swayed. "He wanted this treaty at any price," Yussifzadeh remembers. "We had clear instructions from our president not to return empty-handed from the United States." Yet the negotiations proved extraordinarily complicated, as neither side had any experience of how to put together a production sharing agreement (PSA) in a post-Soviet country.

After forty-seven exhausting days, an agreement was reached. On September 20, 1994, a triumphant Aliyev met with the CEOs of the Azerbaijan International Operating Company (AIOC), an international consortium of about a dozen oil corporations, to form what came to be called the "contract of the century." For the first time since the foreign oil barons were dispossessed and expelled in the October revolution of 1917, overseas companies were allowed to invest in Baku's oil industry. Several billion dollars flowed into new production facilities, with a majority share secured by the American company Amoco. British Petroleum, initially a secondary shareholder, later acquired Amoco and became the most important corporation doing business in Baku.

Russia and Iran protested strongly against the contract, accusing Aliyev of handing out concessions for oil fields that Azerbaijan possibly did not own. No agreement exists among the five Caspian littoral states-Russia, Kazakhstan, Turkmenistan, Azerbaijan, and Iran-on a territorial separation of the Caspian Sea. Complicating matters further, both Iran and Turkmenistan laid claim to oil fields that had been given to the Western consortium for exploitation. In Russia, Sergei Karaganov, President Boris Yeltsin's top foreign policy advisor, presumably had the Bolshaya Igra (the Great Game) in mind when he called the contract part of a "century-old game." Several months earlier, on July 21, 1994, Yeltsin had signed secret directive number 396, for the "protection of the interests of the Russian Federation on the Caspian Sea," which clearly stated that Russia should uphold its sphere of influence in the Caucasian and Central Asian republics.7 Moscow's political elites despised the idea of their former colony Azerbaijan hitting the oil jackpot while Russia would be left empty-handed.

Right away, Western investors in Baku were faced with the problem of how to get the oil and gas from the landlocked Caspian Sea to the markets of the industrialized world. Determined to keep precious raw materials out of Russia's reach, the United States equally rejected a southern route through Iran. Zbigniew Brzezinski, President Jimmy Carter's national security adviser, has described what was-and still is-at stake: "Azerbaijan's vulnerability has wider regional implications because the country's location makes it a geopolitical pivot. It can be described as the vitally important 'cork' controlling access to the 'bottle' that contains the riches of the Caspian Sea basin and Central Asia. An independent, Turkic-speaking Azerbaijan, with pipelines running from it to the ethnically related and politically supportive Turkey, would prevent Russia from exercising a monopoly on access to the region and would thus also deprive Russia of decisive political leverage over the policies of the new Central Asian states."8

The U.S. government has lobbied since the mid-1990s for a third option: a gigantic westbound pipeline, covering a distance of 1,090 miles, from Azerbaijan's capital Baku, across the neighbouring country of Georgia, to the Turkish Mediterranean port of Ceyhan. Unlike Novorossiisk, Ceyhan is a deep-water port that can accommodate tankers of up to 300,000 tons capacity. Fearing an increasing number of tankers from the Black Sea that could conceivably lead to accidents in the narrow Bosporus Straits (with catastrophic consequences for Istanbul), the Turkish government first proposed the Ceyhan project. It would also enhance Turkey's geopolitical significance to the West, on the wane since the end of the Cold War. For its part, the United States was keen to prop up the moderately Islamic Turkey as a regional power. With President Bill Clinton as moderator, the heads of state of Azerbaijan, Georgia, and Turkey met in Istanbul on November 18, 1999 and signed a treaty authorizing the construction of the Mediterranean pipeline from Baku to Ceyhan.

In order to meet U.S. Ambassador Ross Wilson, Washington's most important diplomat in the Caspian, in Baku, I have to pass several times through a metal detector that keeps beeping until I have fished every pen from my pockets. The security guards then completely dissemble each pen and confiscate all electronic gadgets, even a PDA planner.

"As you can imagine, this region has become even more important to Washington," Ambassador Wilson, a Minnesota native, offers after we sit down on a sofa, underneath the portraits of President George W. Bush and Secretary of State Colin Powell. "We do not see ourselves as part of a Great Game with Russia, least of all in a zero-sum game. We have our interests, the Russians have theirs-but they don't necessarily need to collide." In his mind, the Mediterranean pipeline is not an American attempt to counter Russian influence in the region but to "make sure that the Caspian oil gets to the markets." Then Ambassador Wilson clarifies himself. "Of course, the Azeris try and play off America and Russia against each other. But they understand that the United States alone is the guarantor of their independence." It sounds like a decision when Wilson announces in a firm voice, "The oil will never go through Russia."

In order to deter investors from the Ceyhan pipeline and thus thwart the project, Russia has in the past destabilized the southern Caucasus, Georgia in particular. "Then Moscow got a little problem called Chechnya. Now the Russians have become more cautious." Wilson argues that overall, however, there is good cooperation with Moscow on many Caucasus issues.

As for Iran, Azerbaijan's southern neighbor, Ambassador Wilson's comments are less tempered. "Iran is a competitor for Azerbaijan and is trying to control the Caspian Sea. On a regular basis, Iranian ships penetrate Azerbaijan's territorial waters, and Iranian fighter jets enter Azeri airspace." The United States has responded by giving two new patrol boats to the Azeri border police.

Despite the slight rapprochement with Tehran during the war against the Afghan Taliban, it remains out of the question for the State Department that Caspian oil be pumped through a pipeline running across a country ruled by Shiite mullahs. "Iran supports terrorism and is determined to acquire weapons of mass destruction," Wilson explains. "Therefore we must curtail all its means of generating revenue which would help the government fund those activities." The U.S. Congress imposed economic sanctions against Iran in 1996 as part of the Iran-Libya Sanctions Act, prohibiting American companies from doing business with that country. The law was renewed in 2001, against the opposition of several business-friendly Republicans. A few weeks after my talk with Ambassador Wilson, President Bush would name Iran, along with Iraq and North Korea, as part of an international "axis of evil."

The great Mediterranean pipeline is supposed to be built by a consortium led by Socar and BP Amoco. However, Washington's geopolitical pet project encountered initial skepticism in corporate headquarters. The oil executives considered the pipeline too long and, at construction costs of $2.9 billion, too expensive. Additionally, it would run across politically unstable territories-the southern Caucasus and Kurdish-populated eastern Turkey-which make any investment appear very risky.

The first leg of the route through Azerbaijan and Georgia worried the planners the most. Since the fall of the Soviet Union, several ethnic conflicts and political power struggles have broken out in the region. In the early 1990s, Armenian troops wrestled the predominantly Armenian-populated enclave Nagorno-Karabakh from neighboring Azerbaijan. Tens of thousands died and almost a million Azeris were expelled from their homes. After numerous ethnic pogroms hundreds of thousands of Armenians fled from the hitherto multiethnic and cosmopolitan city of Baku. Many Russians likewise moved away. At the same time, Georgia sank into chaos when its provinces of Abkhazia and South Ossetia seceded, leaving thousands of people dead. None of these conflicts has yet been resolved. They keep smoldering below a deceptive surface of diplomatic negotiations and UN peace troops. Add to this volatile mix the Chechen war, along with the fact that the proposed Mediterranean pipeline is only a day's march away from any of these war zones, and the likelihood of even a drop of Caspian oil reaching Ceyhan seems remote.

No one in Baku knows how dangerous a place the Caucasus can be better than Vahid Mustafayev. The thirty-five-year-old TV journalist reported from the theaters of war in the Caucasus, ranging from Nagorno-Karabakh via Abkhazia and South Ossetia to Chechnya. Often, he was the only person to have pictures of the most perilous frontline situations. When Mustafayev came to realize how badly foreign TV stations pay local freelancers for their risky work, he founded the Azerbaijan News Service (ANS). Today he is the CEO of the only television and radio network in the country to be both commercially successful and independent from the government.

We meet in the studio in the southern hills of the city. The midday news has just been produced, and the cameras are being turned off. Mustafayev, wearing an immaculate dark suit matched with a thick yellow tie and fine Italian leather shoes, proudly shows me around the studio, filled with modern and Western-made broadcasting equipment. "We set all this up on our own in the past couple of years, without a single dollar but instead much opposition from the government," Mustafayev says. "And now these microphones are the only ones in the country that the government does not control. And we have more viewers and listeners that any other station." Mustafayev no longer has the time to roam with a camera but is all too familiar with the motivating forces behind the conflicts he was covering. "All the Caucasian wars are, at least partly, about oil. The Russians are trying to prevent the big pipeline from Baku to Ceyhan from being built." In the 1990s, Russia tried to destabilize the southern Caucasus by ensuring that crises and conflicts would percolate indefinitely. "Russia still views Azerbaijan as part of its empire. Once it loses this country, the entire Caucasus is lost." To keep the Americans out, Mustafayev continues, Russia had even aligned itself in the south with its old rival, Iran. Together, the two countries were trying to pinch Azerbaijan from both sides to restrict its dealings with the West. "In Baku, there are more agents and spies than businessmen-most of them are Russians and Iranians."

Mustafayev asks his secretary to fetch a map of the Caucasus. With a red pen, he draws the planned route for the pipeline to Ceyhan. "Russians are good people until they see a map and start drinking vodka. Then they go berserk. They incited the Armenians to fight against us and they supported them." From 1994 to 1997, Moscow delivered $1 billion worth of weapons to the Christian country of Armenia, Russia's only ally in the Caucasus. MiG-29 jet fighters and S-300 missiles were part of the generous military aid. "No peace-no oil," Armenia's President Robert Kocharian often said. The direct route of the planned pipeline would have run across Karabakh and Armenia. Instead it now makes a big northern detour around those territories.

Suddenly, Mustafayev's face darkens. He is thinking of the day in 1991 when his brother, also a cameraman, died while filming in Karabakh, torn to pieces by a grenade. We walk into the studio's hallway, where a blurred picture is exhibited in a showcase. It shows nothing but a swatch of grass and sky. "That was my brother's last camera shot after he had been hit and fallen to the ground." His voice turns very soft, but is still determined. "It is about time that our army win Karabakh back. We must take revenge for our dead, and the Armenians will have to pay for their crimes." But would that not lead to further bloodshed? Are negotiations not a better solution? Mustafayev shakes his head. "For ten years our governments have negotiated and the Armenians have not moved one bit. That leads to nothing. Our refugees live in abject poverty, not one of them has yet been able to return to his home."

Mustafayev turns out to be a proud Azeri nationalist. Every day, his station ANS put pressure on the Aliyev regime to solve the Karabakh issue by way of a consistent war policy. "Of course, it is disagreeable to the powerful that, amid their enthusiasm about the oil boom, we remind them of their patriotic duty. With the help of the oil money our armed forces need to be modernized and made strong again." Would he himself go to the Karabakh front to fight? "Of course! The sooner, the better. We must fight this war against the Armenians now. We cannot leave this job to our children." Then Mustafayev sends for his own limousine, an oversized, armored Range Rover, to take me back to the hotel. The car radio plays a warlike-sounding song by a well-known Azeri rap band: "Karabakh or Death!" The lyrics tell of massacres perpetrated by Armenians, and of the blood revenge the Azeris will soon take. The band's singer shouts over and over "Jihad! Jihad!" I ask the driver, what radio station we are listening to. "This is ANS, what else?"

The next day, I board the train from Baku to Tbilisi in Georgia, the pivot for the Mediterranean pipeline plan. "Lock the door to your cabin," the train conductor advises me after checking my ticket. "The Georgians are all bandits."

©2003 by Lutz Kleveman. Reprinted with permission from Grove Atlantic, Inc. All rights reserved.