Publication: Monitor Volume: 3 Issue: 165

Russian and Chechen government officials are meeting in Moscow today in another attempt to agree to the terms by which "early" Caspian oil bound for western markets will be transported from Baku across Chechen territory to Russia’s Black Sea port at Novorossiisk. Chechnya will be represented at today’s talks by Khozh-Akhmed Yarikhanov, President of Chechnya’s YUNKO oil company, while the Russian delegation will be headed by First Deputy Fuel and Energy Minister Viktor Ott. Ott has replaced Deputy Minister Sergei Kirienko, who was banished from Moscow "on holiday" after negotiations between the two sides broke down last week.

The outstanding issue is the tariff to be paid to Chechnya for the oil pumped through the 153 km pipeline that crosses its territory. Russian first deputy prime minister Boris Nemtsov, who is also fuel and energy minister, told Russian TV yesterday that he expects the agreement to be signed at the close of today’s negotiations. (RTR, September 7) Nemtsov said he believes Yarikhanov will accept the terms proposed by the Russian side. If not, he said, Russia has worked out "eight alternative routes" to get the oil from Baku to Novorossiisk, all of them bypassing Chechnya.

There are two problems with Nemtsov’s statement. One is that a protocol was initialed by Russian and Chechen representatives last week and the federal government confidently asserted at that time that Chechen officials would come to Moscow last week to sign the document — but they did not. The second problem is that the Russian government is itself split over the terms of the agreement (and this in turn seems to be the real reason why the Chechen officials decided not to come to Moscow).

Russia has all along been offering Chechnya the basic internal tariff of $0.43 per metric ton of oil piped across Chechen territory. The Chechen side demanded $2.20. Russian Security Council secretary Ivan Rybkin proposed a compromise: Russia would pay Chechnya $0.43 per ton, but the Russian pipeline company Transneft would make up the difference between that and the $2.20. The difference would be accounted for as a contribution toward the repair of the Chechen section of the pipeline, badly damaged during the 1994-96 war. The Chechen side said it would accept the compromise.

At that point, it seems, Nemtsov and his deputy Kirienko threw a monkey wrench in the works. They insisted that the difference should be paid not by Transneft but from the Russian federal budget. Yarikhanov sounded the alarm, saying that this arrangement would not be in Chechnya’s interests. He argued that, whereas the Transneft solution would have been pure profit from Chechnya’s point of view, Nemtsov’s plan was to deduct the extra payment from money that Russia has already agreed to pay to Chechnya in budget allocations for post-war reconstruction. Yarikhanov said Nemtsov’s arrangement would be a loss for Chechnya, since Djohar-gala would be paying for the restoration of its war-shattered economy out of profits from oil transit rather than receiving an outright payment from Russia for the restoration work as Yeltsin promised Maskhadov when the two presidents met in Moscow last month. (Russian agencies, September 5-7)

It is not yet clear on what basis today’s negotiations are being conducted. The fact that Yarikhanov expressed his willingness to go to Moscow suggests that he believes a compromise can be worked out. But the tough tone that Nemtsov adopted in his TV interview last night, when he warned that Moscow would use a detour if Chechnya does not agree to Russia’s terms, suggests that the Russian government remains divided on the issue.

Chechnya Celebrates Independence, Rejects Russian Criticism.