Publication: Monitor Volume: 6 Issue: 56

Ukrainian President Leonid Kuchma’s March 15-17 official visits to Georgia and Azerbaijan highlighted the common Western orientation of the three countries and their effort to secure their common interests in the Caspian-Black Sea area. For the second consecutive year, Russia has interrupted oil supplies to Ukraine just before the agricultural spring season, when demand for fuel oil soars. Moscow announced this measure last December as a way to force Kyiv to accept Russia’s terms concerning the settlement of Ukrainian arrears for natural gas. Apart from that punitive measure, the Russian government introduced a general surcharge on oil exports–driving up the price of oil supplied to Ukraine–and unilaterally excluded major categories of Ukrainian and other CIS countries’ exports from preferential treatment under existing free trade agreements, thereby adding to Ukraine’s payment problems.

Kyiv and Baku responded to that emergency by signing a supply agreement which took effect this month, with Georgia as the transit country. Under the agreement, Azerbaijan will be sending each month 50,000 tons of oil products, mainly diesel fuel–the latter priced at US$345 per ton, including transportation charges–via the Georgian ports of Poti and Batumi to Ukraine’s terminal near Odessa. Kyiv is currently negotiating with Kazakhstan for additional supplies which would transit Azerbaijan and Georgia to reach Ukraine.

While in Baku, Kuchma commented: “We have not received even one barrel of Russian oil since last December. How can one speak about partnership? Do partners behave this way? Azerbaijan has shown real partnership. Moscow is doing its best to alienate Ukraine and forcing us to seek alternative supply sources. The more Russia pressures us, the further apart will we grow.”

The Ukrainian delegation made a strong pitch in Baku for the idea of routing Caspian oil via Georgia and Ukraine to Poland and the Baltic region. Actively supported by Poland and endorsed by U.S. Energy Secretary Bill Richardson last month in Kyiv, the proposed route would require expanding the capacity of the existing Baku-Supsa (Georgia) pipeline, instituting regular tanker service from Supsa to a terminal near Odessa, expanding that terminal, and completing half the length of the pipeline from Odessa to Brody on the Ukrainian-Polish border. Although financing has yet to be secured, Kuchma declared in Baku that Ukraine is determined to complete by 2001 the terminal and the pipeline on her own territory as a matter of “vital national interest.” The Azerbaijani side, however, reacted coolly to this proposal, because Caspian oilfields will not in the next few years produce sufficient oil to support more than one major export pipeline. Current plans call for maximizing the oil volume available for the Baku-Ceyhan (Turkey) pipeline (Zerkalo (Baku), March 2; Turan, AzadInform, UNIAN, DINAU, Ukrainian Television, Itar-Tass, March 17).