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Russia: Elections Certain To Affect Chechen Oil Deals

Grozny, 27 January 1997 (RFE/RL) - It is increasingly clear that a resolution of conflicts surrounding a pipeline transporting Caspian oil through Chechnya provides the key to the separatist republic's economic recovery. But the resolution largely depends on the outcome of the Chechen elections.

Chechnya's economy has been almost completely destroyed during the 21 months of violent conflict with Russia. According to Khoz Akhmed Yarikhanov, head of Chechnya's energy sector, the damage caused by the war to the republic's energy industry alone -- and this includes the pipeline -- is estimated to reach about $600 million. Russia says that the repair work on the existing pipeline is much lower and it plans to finance it with the expenditure of no more than $55 million.

The leading presidential candidate Aslan Maskhadov said in Grozny this week that all talks with Russia will be postponed until the outcome of the presidential election are clear and the new Chechen government is in place.

At the beginning of this month Russia's Energy Minister Anatoly Shatalov, leading a Russian delegation to Azerbaijan, said in Baku that Moscow was ready to start the transport of Azerbaijani oil through Russian territory. And the head of Russia's pipeline monopoly company, Transneft, Valery Chernayev, said subsequently that the trial batch of Caspian oil would shortly be sent to Russia through Chechnya's pipeline.

An international consortium including Russia's Lukoil, British Petroleum, American companies Amoco and Exxon, Saudi Arabia's Delta, and Azeri Gnkar, is expected to start extracting oil from the Caspian Seas shelf in the next few weeks. The consortium plans to exploit the massive Caspian oil reserves by pumping oil along two routes: one, through Russia and Chechnya, and the other, through Georgia.

The consortium created an international company, Amok. It signed a contract with the Russia's Transneft, which owns and manages Russia's oil pipeline system. Transneft is entirely under state control.

According to Transneft's original project the Caspian oil should be transported to the Russian Black Sea port of Novorossisk through the existing pipeline crossing the southern Russian republics of Dagestan, Khabardino-Baltaria, breakaway Chechnya, the Stavropol region and the Krasnbodarsk region.

But, following Shatalov and Chernayev's announcement, Chechen oil company Yunko said there was still no agreement between Chechnya and Russia on the exploitation of 151 kilometers of pipeline passing through Chechen territory.

As part of the peace accord on ending the war in Chechnya, Moscow had agreed to negotiate a deal on sharing the profits from the oil transit by December, 1996.

According to Yarikhanov, Chechen separatist authorities do not want Yunko to become a simple subcontractor of Transneft. He said Yunko is exploring different alternatives including a direct accord with Amok and other projects that he declined to disclose.

Yarikhanov told RFE/RL that Yunko is "actively waiting" for further developments in the aftermath of the Chechen elections, when a new president and government is in place. He also said the stalled negotiations are "a Russian, not a Chechen problem." But he admitted that Chechnya's future budget will depend mainly on the sale and transport of oil and its products.

Chechnya's own oil resources are said by international experts to be scarce, but Yarikhanov said that Yunko is working to explore ways to establish oil extraction in the republic. According to Yarikhanov, the transport of oil, "is not Chechnya's first priority."