In May 2004, Rosneft head Sergei Bogdanchikov told Interfax that
about 7 percent of the republic's 2003 oil production -- some 150,000
tons, was stolen, causing his company some $100 million in losses.
Rosneft owns 51 percent of the shares of Grozneftegaz which was
established by a government resolution in November 2000 and is
responsible for all oil extraction in Chechnya. The other 49 percent is
held by the Chechen government. The license to extract oil, however, is
held by Rosneft. In 2004, Rosneft earned 12.8 billion rubles in oil
sales from Chechnya.
According to pro-Moscow Chechen President
Alu Alkhanov, the oil industry accounts for 70 to 80 percent of the
republic’s official budget, although Interfax reported on 19 May that
Chechnya received 5.2 billion rubles in federal subsidies in 2004.
the beginning of 2005, 70 criminal cases related to illegal oil
dealings have been opened in Chechnya, according to the press service
of the Russian Interior Ministry. Some 133 makeshift refineries were
liquidated since the start of the year, 50 tanker trucks carrying
stolen fuel were detained, and some 300 storage tanks were liquidated,
Interfax reported on 12 September. In 2004, more than 1,700 illegal
mini-oil refineries were liquidated by the police.
Oil And The Insurgency
it seems clear that oil has played some part in funding the insurgency
in Chechnya and the North Caucasus throughout the two Chechen wars,
analysts also believe that revenues from stolen oil have not played a
decisive role in fueling the fighting.
Officials in Grozny and
Moscow periodically assert that Chechen resistance groups use revenues
from stolen oil to purchase arms. Other analysts, though, are inclined
to believe that the illegal oil-refining industry in the region is
primarily used to generate personal profits for local "entrepreneurs."
1994, during the early stages of the first war in the North Caucasus,
oil transit through the region played an important strategic role. The
Baku-Novorossiisk trunk pipeline transited more than 100 kilometers
through Chechnya and was often attacked by saboteurs. Considerable
amounts of oil were stolen. As a result of this and tariff disputes
after the war, a 300,000-barrel-per-day pipeline bypassing Chechnya was
constructed in 2000.
However, theft of oil by illicit drilling and by stealing from local pipelines in Chechnya continued on a smaller scale.
Money And Government
point of contention between the Chechen government and Moscow has been
over control of oil resources located inside the republic. Rosneft
estimates that known oil reserves in Chechnya will last about 12-15
years, Interfax reported on 15 May 2004. Total production of oil in
Chechnya is around 2 million tons a year.
Alkhanov has tried to persuade Russian President Vladimir Putin to turn
over the oil-drilling license to the republican-controlled
Grozneftegaz. According to “Gazeta” on 22 August, Alkhanov told Putin:
"If Grozneftegaz receives the license, Rosneft will not lose anything.
Grozneftegaz brings in 250 million rubles a year to Chechnya’s budget
as profit tax. Granting the license will increase the budget’s oil
revenues to 2 billion rubles.”
While Putin promised to think
over this proposal, “Gazeta” speculated that he was not satisfied with
the plan. The paper quoted a source in government who stated that
“Chechnya has a lot of privileges and tax breaks, but Grozny is
interested in controlling Grozneftegaz.”
to sources who argued that “passing over the license to Chechnya will
let the Chechen administration control production and cash flow. This
means that Chechnya would have serious political tools. Moscow will
never agree to it.”
With parliamentary elections in
Chechnya due on 27 November, Alkhanov appears intent on pushing his
proposal to Putin and using it to his advantage in the campaign. On 21
August, Putin promised to sign off on the plan, but this has not
the government of Chechnya seeks to get petrodollars, rebels have been
busy blowing up gas pipelines and oil infrastructure in an effort to
damage the Russian economy.
In 2004 a number of significant
incidents of sabotage took place in the region, and the Russian
authorities attributed them to Chechen rebels.
In Daghestan on 5
April 2004, the Russian gas pipeline to Azerbaijan was interdicted for
several days. As a result of the incident the Baku-Novorossiisk oil
pipeline was also damaged. On 24 April 2004, the Samara-Lisichansk
long-distance pipeline was blown up in the vicinity of Volgograd.
5 June 2004, the Baku-Novorossiisk oil pipeline reservoir was bombed.
On 8 December 2004, the Russian gas pipeline to Azerbaijan was blown up
In 2005 this campaign seems to have been halted --
possibly due to increased security measures such as the installation of
the Magistral pipeline monitoring system, which detects unauthorized
personnel and dispatches rapid response teams.
Chechen resistance fighters have displayed a flair for striking at a
variety of targets in the past and a lull in sabotage operations in the
oil sector is not necessarily a sign that they have abandoned this