The Chechen government has shut down the part of Baku-Novorossiisk oil pipeline transiting its territory, which until recently was the only existing export route for oil coming out of Azerbaijan.
Chechen President Aslan Maskhadovís' press secretary Mairbek Vachagayev said that Grozny had put trans-Chechnya oil transportation on hold because the Russian government had failed to pay for pipeline security measures, as agreed. Moscow has not paid the Chechen pipeline guards' wages or other security costs for 6 months, Vachagayev said. Russia's debt to Grozny for pipeline security now amounts to 100 million rubles, he said.
He added that the Azerbaijani government had been notified that Chechnya had shut down the pipeline as it could no longer guarantee the safety of oil transportation. No word was available on Baku's response. Azerbaijani officials complained earlier this year about frequent interruptions of oil supplies transiting the Russian republic.
Russian government officials said on Apr. 1 that they were trying to resolve the matter. Fuel and Energy Minister Sergei Generalov said that the cabinet had already drafted a resolution authorizing payment of about 70 million rubles to Chechnya. The document has been sent to Prime Minister Yevgeny Primakov for signature, he said. Generalov added that Primakov had been expected to sign the document earlier, but had been distracted by the war in the Balkans.
Pipeline sabotage The pipeline was shut down several days after Musa Charayev, the leader of the special Chechen force set up to guard the pipeline, was shot to death, apparently by thieves bent on stealing oil.
Pipeline theft has long been a problem in Chechnya. For years, thieves have been punching holes in the pipeline and drawing out oil to feed illegal refineries. This practice caused so much damage to the pipeline that the Russian state oil pipeline operator Transneft was forced to shut it down in summer 1997, just ahead of the beginning of offshore oil production in Azerbaijan. Punctures of the pipeline by thieves caused a fire in February that led the Chechens to again shut down the line. After the killing of Charayev, President Maskhadov ordered all of the republic's top oil officials to resign. Vachagayev claimed that Charayev had been shot because Chechnya had no money to guarantee the pipeline guards' safety.
Azerbaijan doubts
The incident will almost certainly diminish Azerbaijan's willingness to export its oil through Russia. Baku is already unhappy about frequent disruptions of oil flows to Novorossiisk.The problem for Russia now is that Azerbaijan now has an alternative to the Baku-Novorossiisk line. The Azerbaijan International Operating Co. (AIOC) has completed work on the Baku-Supsa early oil pipeline and expects to export its first tanker cargo of oil from Georgia this month.
This makes it extremely unlikely that Azerbaijan will make more use of the pipeline through Chechnya. The Baku-Supsa line is capable of carrying almost all of the 5.25 million metric tons of oil the AIOC plans to produce this year (see related story, this page).
Dmitry Savelyov, the head of Transneft, has said he expects only 2 million metric tons of Azerbaijani oil to pass through the Baku-Novorossiisk pipeline in 1999, down from 2.87 million metric tons in 1998.
The Russian pipeline is capable of carrying up to 7 million metric tons/year of oil. Transneft has said it will lower the charge for oil shipped from Baku to Novorossiisk, once the volume of oil flowing through the pipeline rises. The tariff now stands at $15.67/ton.
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