Publication: Monitor Volume: 3 Issue: 25

The state monopoly Transneft, which runs Russia’s oil pipeline system, has notified its would-be partners in Baku that it will not transport Azerbaijani oil through the pipeline to Russia’s Black Sea port of Novorossiisk via Chechnya. Transneft claims that last month’s agreement to transport the oil to Novorossiisk on an experimental basis from February through August referred only to oil extracted by the AIOC multinational consortium under the "contract of the century," and not to "Azerbaijani" oil extracted by that country’s State Oil Company (SOCAR). But, breaking the news in Baku yesterday, SOCAR vice-chairman Ilham Aliev (son of president Haidar Aliev) stated that the January agreement had referred to Azerbaijani oil without any distinction, and that it could not have covered AIOC’s oil because it is due only after August. (Petroleum Information Agency, February 4)

Also yesterday, the head of Chechnya’s Yunko state oil company, Hojahmed Yarikhanov, announced that Transneft is backing out of the agreement signed last November by Russian prime minister Viktor Chernomyrdin and Chechen leader (now president) Aslan Maskhadov on the repair and operation of the pipeline’s Chechen section. Yunko may now give up on Transneft and deal directly with AIOC, Yarikhanov warned. (Itar-Tass, February 4) The Russian deputy minister for oil and energy responsible for this matter, Anatoli Shatalov, had stated last week that "financing is the main problem" in Moscow-Grozny negotiations on the schedule and financing of repairs. (Itar-Tass, January 31)

Moscow has been lobbying hard to divert Azerbaijani and SOCAR oil into Russia, instead of along the shorter and more economical Georgian and Turkish routes. To stake an early claim, Russia agreed last month to pump a modest 200,000 tons of "Azerbaijani" crude from February through August, starting with 30,000 tons this month. After August, Russia wants to transport up to 5 million tons annually of AIOC’s "early" oil through the year 2002, when AIOC’s "big" oil is due on stream. Moscow has offered grossly overoptimistic descriptions of the condition of the pipeline involved. In fact, the pipeline requires substantial funds for repair, particularly but not only on its Chechen section, which was poked full of holes for siphoning during the recent war. Transneft’s move to delay the beginning of oil transport seems designed to conceal the real state of affairs along the pipeline and to buy time for Moscow to raise the necessary funds. As Ilham Aliev observed yesterday, Transneft’s action seriously undermines the credibility of Moscow’s claim to routing AIOC’s oil via Russia.

Kazakstan Sharply Questions Russian Military Testing.