Publication: Monitor Volume: 4 Issue: 115

Azerbaijan and the international consortium involved in the multibillion dollar Azeri-Chirag-Guneshli project face more question marks over the reliability of the oil transit route via Russia. The consortium has recently signed an agreement with Russia’s pipeline operator Transneft, a state monopoly, to transport “early” oil from Azerbaijan to Russia’s Black Sea port Novorossiisk. Under the agreement, Transneft will transit at least 1.5 million tons of oil in 1998 and at least 2.2 million tons in 1999; the volume is to reach 5 million tons in the year 2002. (Energy and Politics, No. 21, June 11, 1998).

Chechen president Aslan Maskhadov warned yesterday, however, that the pipeline’s Chechen section will be closed if Moscow persists in defaulting on contractual obligations to the Chechen side. Maskhadov upheld and elaborated on a similar warning by acting Prime Minister Shamil Basaev (see the Monitor, June 15). Moscow has, Maskhadov said, failed since the beginning of 1998 to pay the salaries of the Chechen security force assigned to guard the pipeline, and has withheld the promised transportation vehicles and communications equipment for that force. (Russian agencies, June 15)

In an instant reaction yesterday, Russia’s Deputy Prime Minister Boris Nemtsov promised to pay up by the end of this week. At the same time he claimed that Russia would, by the end of 1998, lay “most of” the planned bypass pipeline through Dagestan, to avoid Chechen territory. Nemtsov added for good measure that Moscow must maintain its influence in the Caspian region in order to keep out “the American Sixth Fleet.” This remark prompted a Russian television network’s mordant reminder that the Caspian Sea is landlocked. (NTV, June 15)

Nemtsov is a leading opponent of the Azerbaijan-Turkey main export route, and by the same token the principal advocate of diverting Caspian oil to Russia via Dagestan, instead of via Chechnya. He seems to assume that the bypass through Dagestan would lay to rest the security concerns of international oil companies. That assumption looks shaky in view of the security situation in Dagestan itself. Moreover, Moscow is having difficulty raising funds for the Dagestan bypass, whose construction by all accounts seems to stagnate. Even if completed, the Russian pipeline would only be able to carry a fraction of Azerbaijani and other Caspian oil. The situation underscores yet again the urgency of starting construction of the Azerbaijan-Turkey route and consideration of the Ukrainian route as part of a multiple-pipeline strategy for the “big” oil.