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Russia: Oil Pumps Away From Chechnya

Moscow, 17 September 1997 (RFE/RL) - Russia's top energy officials have back-tracked on an agreement signed a week ago with the rebellious Chechen republic to pump Caspian Sea oil across Chechen territory.

First Deputy Prime Minister Boris Nemtsov, who holds the fuel and energy portfolio, said yesterday through a spokesman that a decision has been made to construct a new pipeline as far from Chechen territory as possible.

This statement follows a bomb explosion at a pipeline pumping station close to the border between the two southern Russian territories of Chechnya and Dagestan in which two people were injured. But it contradicted a recent agreement with Chechnya on the pipeline.

According to the text of the agreement between the Chechen authorities and the federal Fuel and Energy Ministry signed on September 9, the Chechens have undertaken to guard workers repairing and operating the pipeline. Reconstruction is urgently needed on several sections of the 153-kilometer line, in order to meet an October 1 deadline. That is the date the Azerbaijan government has set for the start of the first deliveries of oil from the new offshore oil field, known as Chirag, in the Caspian Sea.

The September 9 pact settled on payment of $854,000 by Russia to Chechnya for pumping an estimated 200,000 tons of oil through the renovated pipeline by the end of December. The two sides had agreed on the money days earlier. But they argued over whether to call it a tariff, rated at $4.27 per ton, as the Chechens wanted; or a combination of post-war financial assistance and a tariff of 43 cents per ton, as Moscow wanted. The Russian side finally conceded to the Chechen demands.

Officials of the Azerbaijan International Operating Company (A.I.O.C.), the 11-company consortium which includes Amoco of the United States, Lukoil of Russia and British Petroleum, claim repairs of the old pipeline that runs between Baku, Azerbaijan, to Grozny in Chechnya, should produce a capacity of 180,000 barrels per day in throughput. This would be equivalent to an annual throughput of 13 million tons. Between Grozny and the Russian Black Sea port of Novorossiisk, the line capacity is planned to be 300,000 barrels per day, or about 21 million tons per year.

Immediately after the explosion Nemtsov declared his intention to build a new pipeline, bypassing Chechnya altogether. This was widely taken as reneging on the Chechen deal, but Nemtsov said yesterday that the intention is not to repudiate the deal with Chechnya.

"The pipeline through Chechnya won't be able to pump the 20 to 25 million tons that is planned by the year 2000. So the government has decided to start construction outside Chechnya. The two pipelines will operate side by side," said Nemtsov.

To add to the confusion Andrei Bershin, Nemtsov's spokesman, said the First Deputy Prime Minister intends to consider eight different pipeline routes outside the Chechen border. These vary in cost from $150 million to $220 million, he added. All pass through the republic of Dagestan.

"This project will be financed by non-budget means," said Bershin. "One method would be for Transneft to create convertible bonds, and include them in the privatization of the company."

These plans drew fire from the Duma Committee on Regional Policy, where deputy Vladimir Lysenko said Nemtsov's planned pipeline route isn't far enough from the Chechen border. Lysenko said he had tried to persuade Nemtsov not to build the new pipeline through Khasavyurt, an area of Dagestan populated by one of the Chechen clans. He said he favors a coastal route instead, but acknowledges that would cost $400 million, double the figure for the inland route

"If the government decides to build too close to the Chechen border, the Committee will try to force a reconsideration," Lysenko declared. But Lysenko, who spoke to Nemtsov last week, also said that "the construction of the alternative pipeline is necessary in any case, whatever the situation in the Caucasus."

After two years of bitter warfare between secessionists and federal troops, Chechnya still claims independence from Russia. While refusing to accede to this, the government in Moscow is pursuing a policy of isolating the republic economically. In addition to the proposed Dagestan pipeline, a new railroad has been routed to the Dagestan capital of Mahachkala, bypassing the old route through Grozny. New electricity lines are also being constructed to link Dagestan with the main Russian power grid, also avoiding Chechnya.