Publication: Monitor Volume: 3 Issue: 113

Negotiations between Russian first deputy premier Boris Nemtsov and the president of the Southern Oil Company (YUNKO), Khodzh-Akhmed Yarikhanov, lasted almost all of last week but failed to produce agreement on the transportation of early Azerbaijani oil through Chechen territory. After the unsuccessful talks, Yarikhanov and Russian Security Council deputy secretary Boris Berezovsky flew to Sochi last weekend for meetings with Russian prime minister Viktor Chernomyrdin, who is vacationing there. The Sochi talks also failed to produce the desired agreement. (Nezavisimaya gazeta, June 10)

The Chechen side is insisting on status as a full-fledged participant in the Russian-Azerbaijani agreement on the transit of oil. Chechnya is also demanding that rates for pumping oil through its territory be raised to the international level. Moscow is insisting on domestic Russian rates, which are seven times lower. The rather optimistic statements coming from the Russian side last week led analysts to suppose that Moscow was inclined to give ground to the Chechen side. The newspaper Izvestia even speculated that Moscow might have made such concessions in exchange for the June 6 release of four Russian journalists. (Izvestia, June 6) Subsequent events have demonstrated such assessments to have been erroneous. In fact, Moscow has displayed unexpected intransigence in the talks .

According to the newspaper Segodnya, Moscow’s tough position is linked to the law passed on June 4 by the Russian Duma — "On Measures to Develop Cooperation with the Republic of Iraq" — which provides for cooperation in the area of oil. The newspaper suggests that Russian oil firms see more prospects in a revival of oil exports from Iraq than in developing the oil fields of the Caspian Sea and west Kazakstan, which are plagued by high development costs and uncertainties over export routes. (Segodnya, June 6)

The Russian firm LUKoil has been granted a 52 percent stake in Iraq’s West Kurna field, which could be producing 35 million tons a year once UN sanctions on Iraq are lifted. So far this year, under the UN’s arrangement permitting limited Iraqi oil exports in return for food deliveries, Russian firms have sold 4 million tons of Iraqi oil, in comparison with 3 million tons bought by U.S. companies and 1.5 million tons by the French.

There are two alternative routes for shipping Azerbaijani oil: through Georgia and through Russia (the "northern variant"). Moscow is of course insisting on the latter. But if this route is adopted, the unresolved question of the transit of oil through Chechen territory must be resolved. It seems Moscow has decided upon a rather unexpected and drastic step: it is trying to put pressure on the other participants in the "Caspian consortium" by bringing Iraq into the game.

Tatarstan Offers to Help Chechnya.