Russia's recent threat of sanctions against Latvia because of Latvia's treatment of ethnic Russians is a "temporary" problem, according to Valdis Birkavs, Latvia's Minister of Foreign Affairs.
He doesn't expect shipments of Russian oil and products through Latvia's newly expanded port of Ventspils to be cut off. Those shipments totaled 27 million tons last year.
"The use of sanctions is a bad approach," Birkavs told OGJ last week. "There is no reason to make any changes in crude shipping patterns because shipping through Ventspils is in the economic interest of Russia."
Indeed, said Birkavs, publicity surrounding the sanction threat has dramatically raised the profile of Ventspils just before a Latvian delegation arrived in the U.S. last week to promote trade and investment.
Pipeline expansion
Ventspils is currently operating at only about half capacity, according to Imants Samulis, chief executive of the Ventspils Free Port Authority. Latvia officials are keen to fill that unused capacity and propose to expand the pipeline network that brings crude from western Siberia, Timan-Pechora, the Volga/Ural region, and Kazakh- stan.Two options are being considered to expand pipeline capacity into Vent- spils.
One pipeline would tie the port to the Yaroslavl-Polotsk pipeline at Nevel, Russia. By avoiding both Lithuania and Belarus, that segment would not "be constrained by political developments in these countries," said Samulis. The length of this line would be about 650 km, and it would cost about $510 million, according to officials.
Another option is to build a new pipeline from Polotsk, Belarus, that would follow the existing pipeline for most of the route. It, too, would bypass Lithuania.
This option would provide a better connection to Samara, an important collection point for eastern and southern oil flows, say officials. It would be 560 miles and cost an estimated $435 million.
At the end of 1997, the Latvian government established a working group to manage the pipeline expansion project. In early 1998, five Latvian oil industry firms founded Western Pipeline System. The new company initially will develop a project financing strategy and open discussions with participating governments, Russian oil industry representatives, and western investors.
Samulis says Latvia's "oil transit route," as part of an integrated pipeline system, can move exports from most oil fields in Russia and Kazakhstan. Latvian officials say former Soviet Union exports will reach 165 million tons/year by 2005.
"Even crude from the Caspian could be shipped economically through Ventspils," says Samulis. The Western Pipeline System line would boost capacity of the route to 50-55 million tons/year, according to officials.
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