Russia Turns the Screws on Azerbaijan --
Perhaps Counterproductively
Summary:
The Russian Fuel and Energy Ministry has announced that, due to
instability in Chechnya, the Baku-Novorossiysk pipeline may be
shut down indefinitely. This move, partially strangling exports
of crude oil from Azerbaijan, may be an effort to pressure Baku
into less confrontational and pro-Western behavior. However, if
that is the goal, the move is just as likely to be
counterproductive, driving the wedge between Baku and Moscow
still deeper and sending Azerbaijan closer to the West and
perhaps Iran.
Analysis;
Russia has apparently made the best of a bad situation, using the
explosion that damaged a portion of the Baku-Novorossiysk
pipeline as a pretext to exert pressure on both Chechnya and
Azerbaijan. Regarding Chechnya, Russian Prime Minister Sergei
Stepashin on June 17 ordered Fuel and Energy Minister Viktor
Kalyuzhny to determine how much Chechnya owes Russia for
deliveries of gas and other fuel, and for "enormous losses"
attributable to Chechen damage to pipelines. The most recent
damage to the Baku-Novorossiysk pipeline occurred near the
Chechen border, and has been blamed on attempts by Chechen rebels
to steal crude oil. Stepashin said Russia would submit its own
bill to Chechnya during the upcoming meeting between Russian
President Boris Yeltsin and Chechen leader Aslan Maskhadov, to
counter Chechnya's charges that Russia owes the breakaway
republic tariffs for use of the portion of the pipeline that runs
through Chechen territory.
In a move apparently aimed at increasing pressure on Azerbaijan,
Kalyuzhny announced on June 16 that the unstable situation in
Chechnya would force Russia to close the Baku-Novorossiysk
indefinitely, and suggested that alternative routes should be
sought. The Russian oil company Transneft suggested that the oil
could instead be transported by train through Dagestan, bypassing
Chechnya. However, Transneft's press office said June 17 that
the rail route would not be ready before July. Azerbaijan State
Oil Company (SOKAR) President Natik Aliyev told reporters in Baku
on June 16 that Azerbaijan had not received official notice from
Russia regarding plans to close the Baku-Novorossiysk route.
Further, Aliyev insisted that Azerbaijan would not be interested
in the rail route unless the tariff rate established by a 1996
intergovernmental agreement -- $15.67 per ton -- remained in
force.
Aliyev said that Russia and Transneft had failed to live up to
the 1996 agreement, which calls for Transneft to increase the
volume of Azerbaijan's oil shipments to Novorossiysk to 5 million
tons annually by 2002. In a telegram to Transneft complaining
about the frequent interruptions of crude oil shipments through
the pipeline, Aliyev noted that this year the pipeline had
already been idle for 69 days, putting Azerbaijan some 349,000
tons behind schedule for the year.
The problem is, Baku-Novorossiysk is one of only two routes for
moving Caspian crude from Baku to the Black Sea. And the Baku-
Supsa pipeline, which just opened in April, is unable to take up
the slack. In fact, the Baku-Supsa pipeline was shut down June
16 for 8.5 hours due to a generator breakdown, though the press
service of the Azerbaijan international Oil Company (AIOC)
hastened to state that the shutdown was normal for a new pipeline
and output was not affected. Additionally, plans for a new
pipeline continue to be bogged down in politics, with the United
States campaigning for an expensive and unpopular route from Baku
to Ceyhan, Turkey, that would bypass both Russia and Iran.
By closing off the Baku-Novorossiysk pipeline and, in doing so,
partially strangling Azerbaijan's economy, Russia has increased
pressure on Baku. Pressure to reconsider relations with NATO.
Pressure to make a decision quickly on a new pipeline -- perhaps
too quickly for the Baku-Ceyhan route. But Russia's move is also
a gamble. Russia suffers financially as well from a halt in oil
shipments. It is winning no support for the argument that a
Russian route or a Russian partnership is reliable. The move may
even strengthen ties between Azerbaijan and the U.S. and force
Washington to step up its activities in the region. Finally,
under any circumstances, Azerbaijan is far more likely to shift
toward Iran -- perhaps even with tacit Western support -- before
it bows to Russian pressure. The pipeline closure was an
interesting gambit, but may end up weakening Russia in the
Caucasus rather than increasing Moscow's influence. In the
extreme, it may force a reconsideration by Moscow of military
options in the northern Caucasus.
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