Russia Vows to Keep Influence in Caspian

MOSCOW (Reuters)–Russia must not lose its influence in the resource-rich Caspian region–former Fuel and Energy Minister Boris Nemtsov said on Friday.

At a presentation of Sergei Kiriyenko–Nemtsov’s successor to the oil ministry–Nemtsov stressed the need to compete successfully for a new oil pipeline needed early next century to transport rising Caspian production to world markets.

"We must in no way allow our influence in the Caspian region to weaken," Nemtsov said. He named this as one of the priorities for the new minister.

"We need to win the right to transport main Caspian oil against international competition," Nemtsov. "We have won the first round with the early Azeri oil passing through Russian territory–but that is only the beginning."

Nemtsov was referring to a deal between Moscow and Azerbaijan to carry 120,000 tons of Azeri oil along a pipeline linking the Azeri capital of Baku with Russia’s Black Sea oil export outlet of Novorossiisk.

The pipeline crosses the territory of Chechnya–Russia’s rebellious region. Repairs to the damaged Chechen section of the pipeline were completed just in time to allow oil to pass along the route as agreed.

Moscow plans a new pipeline section bypassing Chechnya.

The $8-billion Azerbaijan International Operating Company (AIOC) also has a deal with Russian oil pipeline monopoly Transneft to carry a minimum of 1.5 million tons (30,000 barrels a day) along the so-called "northern" route in 1998.

Another existing pipeline–linking Baku with Georgia’s Black Sea terminal at Supsa–will also be used to carry "early" AIOC oil from late 1998.

But countries in the Caucasus region are competing fiercely for the main export route–and all the transit fees and political and commercial leverage in the region it would bring.

Russia wants it to run north through its territory–while Azerbaijan–Turkey and the United States back a southern route taking oil to Turkey’s Mediterranean port of Ceyhan.

The US and Turkey say one of the main considerations for backing the Baku-Ceyhan route is environmental. The route would mean tankers loading Caspian crude would not have to pass through the already congested Bosphorus.

But politics are also at play–with Azerbaijan keen to break the fetters of Russia’s continuing domination over the former Soviet Union’s oil and gas transportation networks.

Kiriyenko on Thursday also stressed the need for Russia to compete strongly for the main oil route.

"We are not afraid of open competition," he told a news briefing–adding that the existing pipeline and any section around Chechnya would have maximum capacity of 20 million tons a year (400,000 bpd).

But this was well shy of expected Azerbaijan output early next year of 1.2-2.0 million bpd–Kiriyenko said.

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