I think where it comes from is the Caspian basin, in terms of the countries that the U.S. really focuses on Kazakstan Turkmenistan and Azerbaijan is sandwiched between Russia and Iran and Russia and Iran are two countries of strategic influence to the U.S. hence this region becomes strategically important. This si where the geo-strategic con? Arises from. And in addition you have China on one side and Turkey on one side as well and Turkey is a NATO ally, the U.S. has made great efforts to keep Turkey very much in line with U.S. needs in this region and its an effort to draw these countries Turkey which is much more of an ally in this region than any of the other surrounding countries.

What is very interesting about this whole pipeline debates is that it did not start out as a pipeline that would completely exclude Russia it started off as you know the U.S. was favoring multiple lines when the first pipelines out of Azerbaijan were formulated you had a pipeline north to Russia and you had a pipeline west to Georgia and then back in next year when Iran suddenly became a factor in this picture because of the election of a new president in Iran who was a moderate and who suddenly started making amends to the west and western countries were listening that's when the U.S. really began to weigh in with the Caspian because it seemed like routs through Russia were okay, routes through Georgia were okay, but suddenly if Iran were part of the picture the U.S. was not ready for that yet.

Well I think that for the oil companies what is very difficult in this region is that they have had to manage a set of extremely complex political issues that they were nowhere prepared to grapple with and then you add on top of that the U.S. stepping in with this effort to direct pipelines in a direction where perhaps if big volumes of oil had begun to be discovered in Azerbaijan and there werent a number of disappointments for the present time that a pipeline like the U.S. has envisioned running from Azerbaijan into Turkey would have gained much more commercial support as well. But given that the resources aren't there right now for such a major pipeline and a major investment U.S. companies are suddenly being forced, and not only U.S. companies but foreign companies as well because the U.S. is exerting political capital here with respect to other countries as well to get this pipeline in an east-west direction you have companies suddenly being told that they should shoulder a burden for a pipeline that is more political than economic, commercial at this very point in time.

I think that U.S. companies are very much affected, I think U.S. companies would like to do what the U.S. government would like them to do but the problem is that if the volumes aren't there and if oil prices aren't there either, I mean that's the other issue for companies today that this is an industry that is grappling not only with very complex political challenges in the Caspian, but they're grappling with a situation, as you cant tell from the latest merger news of Exxon and Mobil that they're all trying to figure out how they can survive in an industry where its becoming increasingly difficult just to manage day-to-day much less put you know 3 or 4 billion dollars into a major infrastructure project that just isn't needed right now.

I think that the U.S. businesses that are major players in the Caspian today like Chevron, Mobil for example that these are companies that are clearly committed and i think that you are going to see them remain active my impression is that there are smaller players that are active in the Caspian today that may not even exist as the same companies in the future and that may not have the financial stomach to stay in a region that is very costly to operate in.

Well I think that the companies have to watch very closely what Russia is doing. I'm not sure that back a year or two or below they captured into quite such an extent the destructive force that it can be sometimes. You know there is no question though that the companies understand that in a sense you have to cooperate with Russia in order to work in this region but the reason Russia gets involved in some of these conflicts is because Russia feels threatened by the sudden move of these Western countries and their governments into an area which was very much part of its own backyard, and is still very much part of that. And if you look at the Caspian what I think is very interesting is that the disappointments are coming in these explorations plays, where companies are going in and drilling wells where there was no known oil before, that the most successful ventures are really the ventures that were found and discovered by Russia. And it was Russian geologists, Russian scientist, and the Russians understand that the major plays that Western companies are involved in Kazakhstan and in Azerbaijan were really plays that they discovered And as a result in a way their reaction is to be expected because they want to prevent the western companies from taking all of the benefits of it.

Well I think when the U.S. began emphasizing Baku-Ceyhan so heavily they did it not against Russia it was a more up to factor a pipeline to exclude Iran and without really thinking through that this could bring a reaction from Russia that was pretty negative to where the major U.S. interests lie which is Kazakhstan. I think that Kazakhstan for U.S. companies is probably far more important than Azerbaijan. Because you have Chevron, Mobil and ARCO having about 72 percent of what is probably the major production deal in this region. And Tengiz is located right near Russia and there's a pipeline that's been negotiated over the last 6 years that's finally about to get off the ground. It may be the major pipeline out of this region that will happen for quite a while. An for pressing so hard for Baku-Ceyhan there was an element where you could have derailed maybe this pipeline so this was not so good for U.S. interests. I think once the U.S. government realized that it brought its pipeline strategy at least in terms of its public position finally into a more even keel, where it should be.

Well maybe in the middle east there was more a convergence of interests, maybe the setting was different. I think that uh right now the companies will work with the government in whatever way they can but certainly something that may happened and what could be the worst possible thing that if the companies really cant put 3 or 4 billion dollars into an East-West pipeline at this point, if that pipeline doesn't get the financial backing perhaps from the governments that may be necessary that no pipeline gets built at all, and in the end the companies limit their production to what they can get out through that northern route currently and through the route to Supsa and maybe no other major line to Supsa is built either and you know Iran obviously will remain out of the picture for a while but its not that the companies are sitting there and saying oh you know Iran will open up and that's what we want I think the companies are doing is saying let U.S. just get our oil out in whatever economic way we can I don't think they want to build a major pipeline through Iran at this pont I think they'd be perfectly happy with limited swaps and see how that works, I think they'd like to test out how Iran would work I think they'd like to test out how Georgia would work. You pointed out something very interesting you know these problems along the western route Nagorno-Karabakh, Abhkazia, Georgia I think the companies want to see how a small pipeline to Supsa operates over the period of say a year to see if its secure to see you know if that's another way they may want to go into Turkey eventually. But if Georgia is insecure then how can they even get to Turkey?

Well i think they've got to be concerned I think they'd have to very foolish not to look at these instabilities it think for the financing of a major pipeline this should be a concern as well. Clearly its one thing to get to the coast of Georgia it will be another thing to get from the coast of Georgia down into Turkey because you're right you'll probably have to go through Abhkazia? Or if you go from Supsa down through Ajaria? Both of these enclaves ave Russian military bases, I think the potential for upheaval is great, I think the pipeline runs near enough to Nagorno-Karabakh where you know Armenia you know has expressed its displeasure with Azerbaijan gaining any sort of major revenues from oil exports because it can use it to re-arm itself and restart this war with Armenia so I think that oil companies have to look at all of this and like i say I think they'd like to see stability because pipelines don't bring peace. I think peace has to come first and then you can build these pipelines. And one of the issues in terms of militarily securing these pipelines, I think its very difficult to secure these pipelines militarily I think you're going to have to have stable conditions, stable governments in these areas and as a result if they're going to build a pipeline now I think you're going to see some very serious problems.

Well you know its interesting because im not quite sure how they handle it in Colombia but I do know that in Colombia there has been a recent spate of companies pulling out I think that the attacks in Colombia are taking their toll its clearly not something one can say oh companies are used to operating in these environments and they take care of the problem - there's only so uch you can do to take care of the problem I mean lets face it if you have certain actions by regiments that are tied to the Russian military or whatever else may happen in Abhkazia I honestly don't know how you can adequately provide security or who you would use. I really don't know. I mean it's a big instability and factor of uncertainty I think I'm not sure if companies have ever had to deal with security issues like they would have to deal on a western route out of Azerbaijan.

Well I don't think that this is the major reason, I think that down the line this would obviously become a very important concern. I think right now there's other concerns that are driving this decision on Baku-Ceyhan and again let me point out I don't think the companies are opposed to bringing a pipeline to Turkey. In the best of all world maybe some companies would like to see that pipeline as their most commercial alternative. On the other hand, it's true that if you factor in all of these problems, and then of course a Kurdish issue is Turkey, you know I don't know.

You're talking about the Persian Gulf, you're talking where the U.S. has an existing presence... my impression is that for the U.S. to bring troops to Georgia or Azerbaijan, I see that as extremely far-fetched. I mean I think Russian military involvement anywhere requires so much debate and so much you know oversight from congress that this would be a region where there are so many reasons why I just see it would be quite impossible. The other angle of course that the countries are hoping for is that somehow the Turkish military would provide some measure of protection which I know they're already studying and that's something that these countries would like as some sort of defense protection and it may emanate from Turkey, but again in the event of a real problem to see a foreign group of troops in there when you're up against Russia , I see it as very difficult.