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Slovakia: Experts Launch Study Of Caspian Oil, Gas Impact

Bratislava, 13 April 1999 (RFE/RL) -- Slovak foreign policy analysts have launched a two-year research project to examine the likely consequences after 2010 of Caspian oil and gas on the economies of Slovakia and surrounding countries.

The Slovak Foreign Policy Association recently (April 9) organized a seminar in Bratislava to explain the project to some 60 oil and gas executives and diplomats.

The association argues that the boost in Caspian Sea oil and gas extraction is in the long-term interests of Slovakia's energy sector and economy, as well as international security.

The project is intended to propose measures that would help protect the interests of the Slovak Republic and Slovak companies.

Slovakia currently imports virtually all of its oil and gas from Russia via pipeline. But this will inevitably change with the increased flow of oil from the other Caspian littoral states.

On Saturday, officials from the Caucasus and Central Asia are due to gather at the Georgian port of Supsa for a ceremony opening a 515-kilometer oil pipeline from Baku that will transport 115,000 barrels of oil per day. The new pipeline passes in close proximity to several politically unstable regions, including Nagorno-Karabakh and South Ossetia.

Until now, Caspian oil from Azerbaijan has either been moved by rail across Russian territory or--since October 1997 -- by pipeline, also across Russian territory, much of it volatile -- through Dagestan and Chechnya and other unstable north Caucasian republics to the Black Sea port of Novorossiisk.

At Novorossiisk and Supsa, the oil is loaded on tankers for transport across the Black Sea. For the time being, most of this oil will be transported through the Turkish Straits -- the Bosphorus, the Sea of Marmara and the Dardanelles into the Aegean and Mediterranean seas.

But this is just the beginning. A decade from now, Caspian oil is expected to be extracted in such quantities that oil tanker fleets will be overwhelmed.

Turkey is deeply concerned about the increase in the volume of tanker traffic and the ever-growing size of tankers passing through the Straits.

A variety of proposals for alternative pipelines to resolve the Turkish bottleneck are either under consideration or else are already under construction. These include a branch of the Baku-Supsa pipeline that would diverge at Tbilisi and cut across eastern Turkey to Ceyhan, and a pipeline linking Bulgaria's Black Sea port of Burgas with the Greek Aegean port of Alexandropolis. Both these projects would be costly and no imminent decision is expected on either, particularly in light of depressed world oil prices.

Shortly after the collapse of the Soviet Union, Ukraine's parliament approved construction of a pipeline from the port of Odessa northwest 670 kilometers to Brody on the Druzhba pipeline that brings Russian oil to Hungary, Slovakia and the Czech Republic and on to Western Europe. The Druzhba pipeline has sufficient unused capacity to handle the eventual flow from Odessa-Brody.

A Ukrainian participant in the seminar, Alexander Portfyonov of the Ukrainian Center for International Security Studies, dismissed Slovak allegations that the Odessa-Brody pipeline does not meet international standards and that the pipeline is only 24 percent complete. He says it is "about half ready" and should be finished this year. Ukraine has shouldered the cost of constructing the pipeline, after British Petroleum (BP) backed out of financing the project.

Slovak Foreign Policy Association project coordinator Alexander Duleba says technical drawbacks can be overcome and the Odessa connection is Slovakia's best opportunity for tapping into Caspian oil.

"As far as Slovak interests are concerned, the Ukrainian project is key. It is the most effective and could result in the biggest profits. The Odessa-Brody pipeline, provided it conforms to international standards and is linked to the Druzhba pipeline, which already functions and requires no further investments ... and provided the terminal can be brought on line in Odessa, the oil could flow straight through to and through Slovakia."

Duleba says this would be a lucrative business for Slovakia's state oil pipeline company, Transpetrol, which would stand to earn considerable profits in transit fees for oil transiting some 400 kilometers across Slovakia bound for Austria, the Czech Republic, Hungary and points west. But since Transpetrol is state-owned, Duleba says, the company's managers have shown little interest in the Odessa connection and are unlikely to change their views until Odessa-Brody is complete.

Duleba says proposals to build a pipeline from the Romanian port of Constanta to Hungary are less interesting for Slovakia because any potential transit route across Slovak territory would be considerably shorter and hence less profitable for Transpetrol.

A senior bureaucrat in the Slovak Economy Ministry warned seminar participants that circumventing Russia is no solution and will only lead to further difficulties. In his words, "without greater Russian influence, such projects have no chance of success." But other Slovak participants rejected the bureaucrat's warning as "old-fashioned thinking."

Project coordinator Duleba says contacts between Slovak and Russian officials, particularly in the energy field, are very strong. He says the behavior and logic of Slovak energy managers is short-term, based on considerations from deal to deal.

"One of the goals of this project is to change this attitude both in the management of Slovak firms and among government bureaucrats so that they learn to plan long-term in 10 and 20-plus-year cycles."

Duleba says Russia's cozy relationship with Slovakia in recent years took on such dimensions that Slovakia as a state was not a partner of the Russian government but rather of various large Russian firms. He says this kind of a relationship is a sure road to corruption and misuse of public office.

"In Russia, it is very difficult to discern what the difference is between Russia's state interests and the interests of Gazprom or Lukoil, since frequently the chaos that has prevailed in recent years in Russia has resulted in these companies using the state as an instrument in their business dealings."

The Slovak foreign policy expert says building new pipelines to bring Caspian oil to Europe is in everyone's interest, including Russia's. But he notes Russia finds it difficult to give up its traditional policy of maintaining the dominant role in the region by controlling energy sources and transit routes.