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Friday, February 19, 1999 Published at 22:07 GMT

World: Asia-Pacific

US victory over Caspian pipeline

The pipeline will avoid Russia and Iran

By Central Asia correspondent Louise Hidalgo

The Turkmen government has signed an agreement with an American-led consortium to build a 2,000-kilometre pipeline under the Caspian Sea to Turkey.

The pipeline, which Turkmen officials say will be started later this year, will cost up to $2.5bn.

The consortium is headed by PSG International, owned jointly by Bechtel Enterprises and General Electrics Finance Group, both of the United States.

The ceremony was attended by the American special ambassador to the Caspian region, Richard Morningstar, a mark of its significance for Washington, which has long been pressing Turkmenistan to choose an export route that bypasses both Russia and Iran.

The trans-Caspian pipeline is the route the United States wanted. Its vision is of a network of pipelines to transport the huge but landlocked energy reserves of the Caspian Sea to the Mediterranean, bypassing both the old master in the region, Russia, and Iran.

Rival route

The idea is to pump Turkmen gas under the Caspian Sea to Azerbaijan and on through Georgia, to Turkey. The project is expected to take two years to complete.

Speaking at the signing ceremony, the Turkmen President, Saparmurad Niyazov, said his country would continue to pursue a rival route south through Iran.

But most observers are in little doubt that for the moment, this is a victory for Washington in the race to secure the lucrative transit fees for its allies and the increased political influence that having the main export routes from the Caspian will bring.

Russian-Iran opposition

For Turkmenistan too, the deal brings one step closer its dream of a major pipeline to export its vast gas reserves, estimated to be the fourth largest in the world.

The country is desperately poor and will be hoping that Washington's backing will ease the problems of financing the huge project.

But many problems still remain. Some have questioned the commercial viability of a trans-Caspian pipeline while both Russia and Iran have made clear their opposition to it.

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