Publication: Monitor Volume: 4 Issue: 171

The Russian government is prepared to transit 2 million tons of crude annually to Europe from the U.S. company Mobil Oil’s concession in Turkmenistan. The plan envisages shipping the oil by barge across the Caspian Sea from Turkmenistan to Russia’s ports Makhachkala and Astrakhan, putting it through Russian pipelines to the Russian Black Sea ports Novorossiisk and Tuapse, and loading it there onto tankers. Russia is prepared to increase the transit volume to 6 million tons annually in a follow-up stage and to 12 million later on, but these increases would be contingent on expanding manifold the Makhachkala terminal’s capacity.

The interested Russian firms worked out the terms of the offer at a September 16 conference in Russia’s Transport Ministry. Emerging from that conference, the head of Russia’s maritime shipping company Rosmorflot publicly urged the other Russian firms to lower their transit rates in order to make them competitive. The official indicated that the offer currently on the table exceeds the competitive level of US$30 to US$32 per ton (Russian agencies, September 13 and 16).

This is not the only question mark over the plan. The small transit volume and the multiple transshipments would maximize the costs of the operation. Moreover, any significant investment in expansion of Makhachkala is almost certainly beyond Russia’s means. Hardly any Western investor would rush to Makhachkala, a hotbed of violence among mafia, ethnic and religious groups. Moscow’s doubtful offer only underscores the urgent need for a trans-Caspian, large-capacity oil pipeline from Turkmenistan to Azerbaijan as part of the main line to Turkey–the shortest, most cost-effective and safest among the possible export routes.–VS

Correction: Yesterday’s Monitor stated erroneously that Russia on September 16 had test-fired a Topol-M ICBM. In fact, the missile tested was an older Topol RS-12M.

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