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Russia: Negotiating a New Oil Transport Deal With Chechnya

Moscow, 29 December 1997 (RFE/RL) -- Russia's Energy and Fuel Minister Sergei Kirienko says Russia and Chechnya are negotiating a new agreement on the transit fee for the transport of oil from Azerbaijan's Caspian Sea shelf across Chechnya.

Kirienko made the announcement last week at a press-conference in Moscow. And a spokesman for Transneft, Russia's state-owned pipeline monopoly operator, Aleksei Skvorzov, told RFE/RL that a Chechen delegation is in Moscow this week for the talks.

Oil industry analysts this month had expressed concern about the future of the pipeline transit across Chechnya. They said there were no signs that the existing transit fee agreement between Transneft and Chechnya, which expires on December 31, was being extended or re-negotiated.

What industry officials call "early oil" started flowing on November 12. Moscow and Grozny concluded difficult talks in September on the transit of Caspian Sea oil through Chechnya's section, which covers 150 kilometers of a pipeline stretching from Azerbaijan's capital, Baku, to Russia's Black Sea port of Novorossiisk.

Under the interim transit deal, Russia agreed to a lump sum payment of $854,000 for the transit of 1.4 million barrels of oil through Chechnya this year. A tariff of 43 cents per ton was established. The Chechen side had demanded $2.2 per ton.

Moscow insisted that 43 cents per ton is the normal transit fee for oil sent by pipeline across Russia, ignoring Chechnya's request to be treated as an independent partner in the deal, instead of one of the 89 subjects of the Russian Federation.

Skvorzov said a Chechen delegation has arrived in Moscow for the talks with Transneft and Energy Ministry officials. He declined to give further details, including the composition of the Chechen delegation. It was impossible to obtain a comment from Chechen officials.

As Kirienko put it: "It is clear that the talks will be difficult." However, he expressed confidence that reaching a compromise would be easier than before. Kirienko also said he doubts the agreement now being negotiated will be final. He said that sequence of agreements may be the best solution.

According to Kirienko Chechnya has a complex pipeline system, the majority of which does not work. He added that only the section through which Caspian oil is flowing is a source of income. In Kirienko's words, it's "understandable that our Chechen colleagues wish to include in the transit fee the amount of money necessary to cover the running costs of the entire system."

But, he said, this is impossible in the framework in which the transit fee is being negotiated. He added that a compromise could be worked out.

Russia aims at becoming a major player in exporting the huge and lucrative reserves from the Caspian region. In addition to the Baku-Grozny-Novorossiisk export route, oil companies are refurbishing a pipeline across Georgia for Azerbaijan's early oil exports. The pipeline across Georgia and a new terminal at its Black Sea port of Supsa are expected to be ready for oil exports at the end of next year.

The international consortium that is developing Azerbaijan's Caspian offshore fields has said that from the smooth transport of "early oil" across Russia and Georgia will depend on a decision on which route to favor for the export of larger quantities of Azerbaijani oil, the so-called "big oil," expected in the next century.

Moscow officials have said Russia will build a bypass pipeline around Chechnya. Kirienko said this new pipeline will be built within a year and is not in question.

Chechen officials, concerned that the new pipeline would exclude their Caucasus republic from the potentially lucrative deal, said, when the announcement was first made, that Moscow was blackmailing Grozny.

Apparently wishing to calm Chechen fears, Kirienko said: "Provided all is normal in Chechnya, the new pipeline will be only a reserve route, aimed at showing the reliability" of the so-called Northern route.

He added that in Russia's view, the presence of an alternative pipeline "smoothes the political risk in Russian-Chechen relations and contributes to calm the concerns of potential investors and members of the Azerbaijan International Operating Company who will make future decisions."