Accessibility links

Breaking News

Caspian: Russia Seeking To Build Oil Pipeline To Iran

As Kazakhstan seeks more export routes for its oil, Russia has announced a feasibility study for a pipeline to Iran. The move appears to be aimed at assuring Moscow that it will play a part in any Caspian outlet to the south. Our correspondent Michael Lelyveld reports.

Boston, 9 July 2001 (RFE/RL) -- Russia appears to be joining the race to build a Caspian pipeline to Iran after European oil companies announced plans to study the route.

Speaking at a London conference last week (4 July), the head of the Russian pipeline monopoly Transneft said his company had started a feasibility study for an Iranian line with its Kazakh counterpart, KazTransOil.

The study is separate from one planned by the French and Belgian oil company TotalFinaElf, the Reuters news agency said.

Transneft's Semyon Vainshtok said the line would run through Kazakhstan and Turkmenistan, linking the Siberian oil center of Omsk with Iran's Caspian port of Neka. The project would allow Russia, Kazakhstan, and Turkmenistan to swap their oil with Iran, which can export equal amounts of its crude through the Persian Gulf, Vainshtok said.

The new Russian plan is the latest of many involving Iran and Caspian oil swaps. Ideally, swaps could save hundreds of kilometers in transit by letting Iran refine Caspian oil for use in its northern cities. But in practice, the trade has proved difficult so far.

Iran has had an agreement for crude exchanges with Kazakhstan since 1996, but little oil has changed hands. Turkmenistan has been swapping small amounts of oil, while Iran has undertaken a major project at Neka and its northern refineries to raise its capacity.

Last week, Turkmenistan President Saparmurat Niyazov made a rare trip to Astana after Kazakh Foreign Minister Yerlan Idrisov complained publicly that Turkmen transit tariffs to Iran were too high.

Despite the problems, the route has been promoted as cheaper for Caspian exports than the U.S.-backed pipeline from Baku to the Turkish port of Ceyhan.

Last month, a TotalFinaElf official confirmed the company's plan to pursue the Iran option after a "Financial Times" report. Kristof de Marjerey told Azerbaijan's Media Press that Western oil companies were "eager to sign a memorandum of understanding this summer on setting up a new pipeline connecting Kazakh oil fields with Iran."

Russia seems to have reacted to that interest in striking a deal for its own plan with Kazakhstan.

Robert Ebel, director of the energy and national security program at the Center for Strategic and International Studies in Washington, said the move may be aimed at making sure that Russia is included in the TotalFinaElf effort.

Ebel told RFE/RL: "It would be logical to combine those studies. You don't need to do two."

But on the surface, the Russian proposal may make little sense. While Omsk is an oil center, it is over 4,000 kilometers from Iranian territory in a straight line. The connecting pipelines in western Kazakhstan also run north rather than south.

Moscow's effort seems to be directed at making sure that there is a Russian solution for all Kazakh oil exports, no matter which way they flow. Much of Vainshtok's comments were aimed at convincing his audience that Transneft can provide the best alternatives, either through Novorossiysk on the Black Sea or the new port at Primorsk on the Gulf of Finland.

Russia's attempt to become involved with an Iran route seemed to conflict with that message. Clearly, it would be hard for both the Iranian and Russian options to be the "best."

Within the past month, Russia has made extra efforts to engage with Iran's oil industry. Last week, Russia signed an agreement for "cooperation in the retooling of the Iranian oil and gas complex," the ITAR-TASS news agency reported. But Russia's record of cooperation has been poor.

In March, the head of the center for the coordination of the Russian-Iranian programs, Radzhab Safarov, said that Russian oil companies had failed to respond to some 40 offers of Iranian projects on advantageous terms, Interfax reported.

Safarov said, "Furthermore, Iran committed to not announcing international tenders if Russian companies, including Gazprom and Lukoil, had agreed."

"However, Russian companies failed to promptly react to these offers, and when Iran put its offers up for international tender, our companies succeeded in winning only two projects," he added.

There is little sign that Gazprom has contributed to developing Iran's South Pars gas field under a landmark contract in 1997 that also involved Total, the forerunner of TotalFinaElf.

The two countries are also at odds over a formula for dividing the Caspian Sea, a conflict that could strain cooperation on a pipeline for swaps.

The record makes it hard to predict how Iran will respond as Russia tries to gain a role in its Caspian route. It is also unclear whether the plan would give Kazakhstan another choice or just another form of Russian control.