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. Last Updated: 07/27/2016

Call for Oil Exports Via Iran Irks U.S.




ALMATY, Kazakhstan -- Italian oil company ENI stirred up a long-standing dispute on possible routes for oil exports from the landlocked Caspian basin Thursday by calling for exports through Iran.


This put ENI firmly at odds with the oft-stated wishes of the United States and Turkey, and exposed sharp disagreements between regional powers seeking influence over the vast and valuable energy resources of the region.


"We have to declare clearly that in the medium to long term, we are more interested in the southern route," Domenico Spada, ENI's vice president for Eastern Europe, Russia and Central Asia, said at an oil conference in the Kazakh commercial capital.


"We see 3 percent oil demand growth in the Far East in the next 10 to 15 years, compared with 0.7 percent in Europe. This gives a clear indication of where the oil should go in the next 15 years, and the most convenient route is through Iran."


ENI has oil interests in Kazakhstan and Azerbaijan, and, like all producers in the Caspian basin, has to find a way to get the resources from remote fields to international markets.


The problem with Iran is that, while many see it as the cheapest and most logical route, it remains an anathema to the United States.


"We do not and will not support pipelines in Iran," John Wolf, U.S. presidential adviser on Caspian energy affairs, said at the ITE Kazakhstan International Oil and Gas Conference. "We see only negatives from giving it increased control."


Spada said he understood there could be difficulties with ENI's position, as the United States applies sanctions against Iran, which it sees as a sponsor of terrorism.


"Of course we're aware that this route now could face difficulties, but all producers are aware that these could be solved," he said.


Wolf was cool toward this approach.


"Speculation on policy changes in Washington is at best a highly speculative way to invest real money," he warned.


The discovery and exploitation of oil and gas in the Caspian basin has unleashed a hard-fought diplomatic game between regional powers Russia, Iran and Turkey, all of whom want oil to transit their territories, and their backers. The United States backs Turkey, as does the government of Azerbaijan.


The result is prolonged diplomatic wrangling and no progress on building large pipelines from the region, with one exception: An international group, the Caspian Pipeline Consortium, is building a line from Kazakhstan across Russia.


The president of Turkish state oil company TPAO, Osman Demirag, repeated Thursday Turkey's position, based on environmental and safety reasons as much as economic ones, that a pipeline should transit Turkey to the Mediterranean.


This would give Turkey control over the export route and, at the same time, allow oil to move west from the Caspian basin while avoiding the Black Sea and potential bottlenecks and safety hazards in the narrow Bosporus strait in Istanbul.


But while the United States supports this route, finance is expected to come from companies that would use it. The biggest of these, the Azerbaijan International Operating Co., led by BP Amoco, has made it clear it is not now willing to do so.


AIOC instead favors expanding an existing, shorter and cheaper route across Azerbaijan to the Georgian Black Sea coast.


This approach drew a stinging rebuke from Wolf.


"Some companies would seem to prefer a Caspian development policy which minimizes capital expenditure," he said in a speech in which he was frequently critical of AIOC by name.


"They would seem to believe that they can press extra volumes through the Bosporus regardless of Turkey's environmental and safety concerns. I believe these companies are miscalculating in several respects."