Ukraine Faces Setback In Transit Of Kazakh Oil

On May 19, Oleksandr Todiychuk resigned as president of Ukraine’s national oil transit company UkrTransNafta. Todiychuk’s resignation follows a decision by President Leonid Kuchma to abolish the office of plenipotentiary for the Eurasian Oil Transport Corridor (EAOTC), which Todiychuk held concurrently with the UkrTransNafta post. The EAOTC was responsible for managing the Odessa-Brody oil pipeline, which was built for carrying Caspian oil to central and northern Europe by a non-Russian route.

Plans called for pumping oil from Kazakhstan through this pipeline. The pipeline was to be extended from Brody (on the Ukrainian-Polish border) northward, to Poland’s refineries at Plock and Gdansk. From there, refined products were to be exported to Germany and the Baltic region.

Both of those refineries signed letters of intent last year with UkrTransNafta for transporting a total of 7 million tons of Caspian oil to Poland. However, efforts by Todiychuk and other Ukrainian officials to clinch a deal for Kazakh oil were unsuccessful, mainly due to Russia’s monopoly on export routes out of Kazakhstan.

Commissioned in 2002, the Odessa-Brody pipeline has remained almost dry. Similarly, Pivdennyy oil terminal, near Odessa, which was to be a major user of the pipeline, has been operating well under capacity.

In late 2003, Russian-British joint venture Tyumen Oil-British Petroleum (TNK-BP) proposed to pump Siberian oil south through this Ukrainian pipeline, reversing the originally intended northward direction of oil flow.

Kyiv now seems receptive to the proposal. Kuchma has also sacked other senior Ukrainian officials who had promoted the Odessa-Brody project. The government maintains that the TNK-BP proposal at least offers a chance for Ukraine to recoup its investment in the pipeline.

However, TNK-BP may be the only beneficiary of the deal.

The proposal would close a non-Russian route for Kazakhstan’s oil exports, prevent Ukraine from providing that transit service to Europe, and reinforce Ukraine’s dependence on Russian crude oil deliveries to Ukrainian refineries. In addition, TNK-BP’s oil would be shipped from Odessa via the Bosporus Strait, which is already dangerously overcrowded with ship traffic.(Interfax, UNIAN, May 18, 19; Kiyevskiye Vedomosti, May 19).