Russia's Caspian line to bypass Chechnya

Russia has decided to build a $220 million, 283-km pipeline to export Azerbaijan's Caspian Sea oil, bypassing the breakaway republic of Chechnya. The Russians had difficulty reaching a deal with Chechnya for the repair of an existing export pipeline from Baku via Grozny and Tikhoretsk to the Black Sea terminal of Novorossiisk.

Oct. 20, 1997

3 min read

Russia has decided to build a $220 million, 283-km pipeline to export Azerbaijan's Caspian Sea oil, bypassing the breakaway republic of Chechnya.

The Russians had difficulty reaching a deal with Chechnya for the repair of an existing export pipeline from Baku via Grozny and Tikhoretsk to the Black Sea terminal of Novorossiisk.

Russian First Deputy Prime Minister Boris Nemtsov said repairs on the existing line would proceed, but, "The pipeline through Chechnya won't be able to pump the 20-25 million tons/year that is planned by 2000. So the government has decided to start construction outside Chechnya. The two pipelines will operate side by side."

The first "early" oil from Azerbaijan's Chirag field in the Caspian field was due to be begin production Sept. 26, but extensive repairs and modifications had not been made to the Chechnyan portion of the line.

Azerbaijan International Operating Co., the consortium developing Chirag, planned to swap Chirag oil to Azerbaijan for refining in Baku in exchange for the same quantity of Russian crude at Novorossiisk for export.

The new pipeline will be built within a year from Khasavyurt, in Dagestan, to Terskaya, in North Ossetia. Nemtsov said capacity will be adequate to transport not only early oil but also much larger volumes later.

Negotiations

Renovating the pipeline was a top priority of both the Russian and Chechen governments after they signed a treaty in May formally ending Moscow's undeclared war against Chechnya.

It provided for the export of 5 million tons/year of Azerbaijani oil through the line, and Moscow pledged to pay $2 million for repairs to the 153-km, 180,000 b/d segment through Chechnya. They were estimated to take 20-30 days.

Within weeks, however, Chechnya complained Moscow had failed to release the funds, and the latter claimed Chechnya was making "impossible" tariff demands.

On Sept. 9, the two governments agreed on terms for the export of 200,000 tons of oil in 1997. Chechnya was to be paid 43¢/ton and receive $854,000 from Russia to cover the cost of repairs to the pipeline.

After two members of the Russian repair team were injured in an explosion on the border between Chechnya and Dagestan, Nemtsov announced Russia would build a pipeline through Dagestan and Stavropol Krai, paralleling the border with Chechnya.

Members of the Duma Committee on Regional Policy have complained the planned pipeline route isn't far enough from the Chechen border and crosses Khasavyurt, an area of Dagestan populated by one of the Chechen clans.

Azerbaijan is afraid the Russians cannot guarantee the security of oil transported through or near Chechnya and is considering alternative routes through Georgia and Turkey.