Caspian Oil and the Baku-Ceyhan Pipeline: International Relations Meets International Business

Authors: Horton, Raymond D.; Ruseckas, Laurent
Source: Columbia University
Year: 2000
Company Name: Azerbaijan International Operating Company, BP Amoco
Number of pages: 29

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Abstract:

The central issue is whether the Azerbaijan International Operating Company (AIOC), an international oil consortium developing oil in the Caspian Sea, should build a pipeline from Baku, Azerbaijan to the Mediterranean port of Ceyhan, Turkey. The Baku-Ceyhan pipeline is the centrepiece of US policy for the Caspian region, which seeks to build 'east-west' trade that would reduce the influence of Russia and Iran over Caspian energy resources. The AIOC has resisted building the pipeline on the ground that it is not commercially viable. So far, the US has been unable to persuade Azerbaijan, Georgia, Turkey and international lenders like the World Bank to assemble a financial package acceptable to AIOC. The case describes the 'power vs profits' framework of the dispute and concludes with an interactive spreadsheet that lets users make their own assumptions about key political and economic variables that will determine AIOC's decision.