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Russian oil beats Bush to
market
By John Helmer
MOSCOW - For a decade, Washington
has backed the Turkish and Azerbaijani governments to
steer the export of Caspian-region crude oil away from
Russia. Moscow's latest riposte has been to ally with
the Iranian oil industry and open up the shortest,
cheapest and most lucrative oil route of all, southward
out of the Caspian to Iran.
The economics of the southward route are the
latest blow for the Bush administration as it tries to
redraw the geography of the Caucasus on an anti-Russian
map. But for oil exporters and shippers in the
Caspian, US President George W Bush's jawboning looks
to be as futile as King Canute telling the sea to roll
backward.
Meanwhile, Russian oil producers
and shippers say they are expecting the volume of crude
oil and petroleum products shipped from the Russian
Caspian port of Astrakhan to Iran to more than double
this year. A spokesman for Volgotanker, the leading
tanker operator in the Caspian, said it expects growth
of its oil volume to jump 150 percent over the 2003
level of 800,000 tonnes.
Russian industry sources
claim the expansion of the Iranian port of Neka, and
the construction of a 120,000 barrels per day (bd)
pipeline from Neka to Rey, is one of the new options for
oil movement southward. The Russian shipments of
Caspian oil are paid for by swap arrangements with
Iranian oil shipped out of Persian Gulf ports. Enzeli,
the only Iranian Caspian port able to receive
deep-draft vessels, is also being considered for
receiving oil aboard railcars shipped by ferry from the
Russian Caspian port of Astrakhan. The new oil terminal
at Ilyinka, on the Astrakhan shore, of Russia's
second-largest oil firm, LUKoil, will reach
transshipment capacity of 3 million tonnes annual
capacity (60,000 bd) next year; this year capacity is 1
million tonnes (20,000 bd).
Costly crude
conflicts
Early oil from Azerbaijan's newest
offshore oilfields has been piped northwestward through
the Russian pipeline system to Novorossiysk port, on the
Black Sea, along with crude from the Caspian shoreline
of Kazakhstan. But there have been frequent arguments
with the Azeris over volumes and transit fees, and these
have led to frequent oil stoppages. Transiting Azerbaijani oil
across Georgia to Supsa port is a costly trickle by
comparison.
In parallel, Turkey has been
steadily tightening restrictions on tanker movement out
of the Black Sea, through the Bosporus Straits. The
latest rules ban lengthy and large-capacity tankers -
those which are most cost-effective for charterers and
cargo-owners - from moving through the straits at night.
The delay adds to the transport charges, creating an
expensive chokepoint that has multiplied the costs of
routing oil through the Black Sea for US allies and
Russia alike.
As new Caspian oilfields
come onstream, and the volumes of crude lifted grow
beyond the capacities of the Russian pipeline system to
absorb, the US strategy has been to press hard to redirect
these exports across land toward Turkey. The pipeline
route chosen is known by its origin and destination as
Baku-Tbilsi-Ceyhan (BTC). Its future was in doubt until
Tuesday, when a syndicate of international lenders
signed a landmark agreement committing US$2.6 billion in
loans to the oil pipeline, removing the last major
obstacle to completion of the controversial project. The
Russian government has always understood that this
pipeline was part of the broader US strategy to cut all
links with Moscow of the former Soviet states in the
Caucasus, building a new economic infrastructure that
would dissuade the Caucasus group from ever renewing
these ties. These efforts have proved to be a colossal
boomerang.
A Ukrainian pipeline, designed to
attract Caspian oil into Odessa port on the Black Sea
and then pump it northward to Brody, and thence into
Poland and other Central European destinations, has lain
empty for almost a year. Despite US government prodding,
even the major US oil companies in the Caspian cannot
quite absorb the commercial disadvantages of the route.
Nor can US allies in the Polish government overrule
their colleagues with demands to buy this anti-Russian,
but higher-priced, oil.
The Russian government,
together with Russian oil exporters, has countered with
a proposal for the Ukrainian government to reverse the
oil flow in the pipeline, and pipe Russian crude
southward to Odessa for tankering out of the Black
Sea.
The conflict in Kiev over the strategic
pros and cons of these alternative oil routes has
damaged another US ally in the region. Late last year,
the Ukrainian parliament voted to block the Adria
pipeline reversal project. This was aimed at delivering
Russian crude to the deepwater port of Omishalj in
Croatia on the Adriatic Sea. The Ukrainian veto was
retaliation by the anti-Russian oil lobby in Kiev for
the failure of its Odessa-Brody project.
The irony
of this outcome is that the Omishalj project was first
proposed in 2002 and agreed on by Russia, Belarus,
Ukraine, Slovakia, Hungary and Croatia as a way of
dispatching Russian crude in large tankers to Bush constituents
who own the refineries on the Texas coast of
the United States. Initial capacity, according to the Omishalj
plan, was 5 million tonnes per year, rising eventually
to 15 million tonnes. The Ukrainian deputies justified
their no-vote because, they said, it would be the final
blow to the proposed Odessa-Brody pipeline, should the
Druzhba line be filled up west of Ukraine.
"This
is true," says Adam Landes, an oil analyst in Moscow.
"But Odessa-Brody is doomed regardless. It offers no
competitive advantage to potential Caspian shippers, or
buyers of crude, and this is why it has been idle for
two years now, since it was essentially completed. The
longer Ukraine takes to face up to these rather obvious
facts, the longer that this ill-fated pipeline will lie
dormant."
Another US ally to be caught in the
crossfire has been Latvia. As the anti-Russian pressure
has mounted against Russian oil shipments in the south,
Moscow accelerated the completion of a new oil outlet on
the Gulf of Finland and Baltic Sea - Primorsk - which
opened two years ago.
Controlled by Transneft, the
state pipeline agency, Primorsk receives its crude from
the Baltic Pipeline System - a network of pipelines linking
Russia's new Arctic oil wells and expanding
northwest Siberian fields to the sea lanes to Western
Europe's markets. Once the Primorsk outlet was
established, the Russian government ordered Transneft to
turn off the supply of oil to Ventspils in Latvia.
At one time the Soviet Union's northern gateway for
oil exports, in 1990 Ventspils almost matched Novorossiysk
in capacity and throughput. But no longer. The
Latvians have appealed to Washington for help, but Moscow
will not listen. The opening of Primorsk was the death
knell for Ventspils.
The Americans responded in 2003 by pressing the
Russian government to end Transneft's monopoly over pipelines
and allow the Russian oil majors to build a pipeline of
their own to Murmansk. That, Washington
energy officials claimed, would open a new, commercially effective
route for crude deliveries to US east-coast refineries.
Transneft has responded by accelerating the expansion of
the Baltic Pipeline System, while the Kremlin
has started prosecutions of Yukos, the oil company that was
closest to Washington. The speed of this pipeline-expansion
effort will overtake the growth of Russian export
volumes by 2005, Transneft officials have told Asia
Times Online. The Murmansk project will wither, they
believe, for lack of oil to ship.
Until
Vladimir Putin became president in 2000, Russian oil policy
was dictated by a corrupt alliance of the Russian
oil producers and the US government. Putin's
campaign against Yukos has put a stop to that. Even during
the Boris Yeltsin period, however, Russian public policy
was not to attack the BTC pipeline on strategic
grounds. Rather, Russian tactics were to play for time, and
wait for the economics of oil transportation to tell
against the US plan. So long as crude-oil prices remained low,
time encouraged delay in starting BTC. The US war
against Iraq threatened the pipeline plan, too, by
raising the prospect of a gusher of Iraqi crude on the
market, cutting prices.
But now that Bush is
proving that he cannot lift Iraqi oil, and prices remain
firm for the foreseeable future, a new counter to BTC
has been needed by Moscow to retain the upper hand -
hence Russia's foray into Iran.
(Copyright 2004
Asia Times Online Ltd. All rights reserved. Please
contact content@atimes.com for
information on our sales and syndication policies.)
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