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Ukraine: Gov’t floats Iraqi oil pipe plan

Int’l Relations

The governing coalition of Prime Minister Viktor Yanukovych announced plans this month to create a transport corridor that would diversify Ukraine’s energy supplies by bringing Iraqi oil to Western Europe via Ukraine, itself heavily dependent on Russia for hydrocarbons.

But some energy experts suggest the Yanukovych government, viewed by many as beholden to Kremlin energy interests, might not be very serious about the project, raising it as part of a public relations campaign tied to the elections. On Aug. 1, the Ukrainian government adopted plans to engage in talks with Iraq and Turkey on creating an oil transit corridor that would run from Kirkuk in Iraq to the Pivdenny terminal in Odessa via Trabzon in Turkey. The bold project would involve construction of hundreds of kilometers of new pipeline and barge shipping routes bringing the crude to Ukraine’s Odessa-Brody pipeline. According to the government decision, the talks on the so-called Kirkuk-Trabzon-Odessa corridor should begin next year.

Oleksandr Todiychuk, former chairman of Ukrtransnafta, doubted the Yanukovych government’s dedication to support such a massive project that could, if implemented, weaken Moscow’s grip over energy supplies in the region. “This is a broken record that has been playing since 1993,” said Todiychuk, who works on Ukraine-EU energy issues. Todiychuk tied the timing of the Yanukovych government’s announcement to the elections. “Over the years, many different pipeline projects have been discussed, but there has been no progress. Now, with the election campaign, the government has to show that it is doing something about the transport issue,” Todiychuk added.
Todiychuk has been critical of the claim that oil in the 674-kilometer Odessa-Brody pipeline cannot flow from Odessa to Brody until 2011. The Odessa-Brody pipeline was originally intended to pump Caspian crude from Central Asian republics to Europe bypassing Russia, which controls most of the hydrocarbon pipelines in the region. But the pipeline was reversed before the Orange Revolution by the first government of Yanukovych and currently pumps crude to the Black Sea from where it is shipped further to markets. “If the Odessa-Brody pipeline was operating in the ‘right’ direction, then the government’s case would be stronger. Even if there was 5-6 million tons flowing through from Odessa to Brody, then we could at least argue that a small stream can one day flow like a big river,” Todiychuk said. According to Todiychuk, the Odessa-Brody pipeline could be used to deliver oil to Europe via Slovakia, the Czech Republic and Hungary, in addition to the planned extension to the Polish city of Plotsk.

Konstantin Borodin, an energy analyst with the Fuel and Energy Ministry, said that it is too soon to make any statements on the feasibility of the proposed new route. “We are still analyzing the situation and have come to no firm conclusions,” Borodin said, adding the government’s study of the proposed route may be ready by the end of this year. Volodymyr Saprykin, Director of Energy Programs at the Kyiv-based Razumkov Center, said the new Iraqi transit route “has little chance of success.” “The Black Sea region is full of Russian, Kazakh and Azeri oil that is inexpensive because of the minimal transport costs. Secondly, a new pipeline will have to be built in addition to the costs of shipping the oil on tankers. Third, Turkey has started preliminary work on building a pipeline from Samsun to Ceyhan – in other words, the opposite way than proposed. Fourth, the situation with Iraqi oil is very complex and I think its volumes have been already allocated for many years to come.”

Meanwhile, the presidents of Azerbaijan and Kazakhstan signed a memorandum on transporting more oil from Kazakhstan to Azerbaijan for the recently built Baku-Tbilisi-Ceyhan pipeline that ships Central Asian crude to Turkey’s Mediterranean coast. Ibrahim Aliyev and his Kazakh counterpart reportedly signed a memorandum in Astana on Aug. 7, where Nursultan Nazarbayev hosted the Azeri president. Russia is promoting another project to transport Caspian oil to Western markets that would bypass Georgia, the former Soviet republic that has refused to bow to Moscow’s geopolitical will.

While it still has an edge controlling energy in the region, new transportation routes being developed and discussed promise to gradually reduce Moscow’s control over this geopolitically sensitive business. In a report, investment bank Renaissance Capital said, “Russia will find it increasingly difficult to maintain its monopoly on delivering Central Asian oil and gas to Western markets in the medium-term.” (kyivpost.com)

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