Ukraine and Azerbaijan have held talks in Baku on possible avenues of cooperation in carrying out the Odesa-Brody project. This oil pipeline was built in order to transport Caspian oil primarily from Azerbaijan across Ukraine to the countries of Central Europe and create an alternative to Russian supplies. Oil from Azerbaijan is supposed to be transported by tanker from the Georgian port of Supsa to Odesa and from Brody further west. Upon returning to Ukraine the delegation head, First Vice Premier Oleh Dubyna, stated that the negotiations had been successful. “Azerbaijan is interested in possible participation in supplying oil to the European market through Odesa-Brody,” he said. According to him, a delegation from the Azerbaijan State Oil Company will soon visit Odesa to familiarize themselves with the capacities of the oil terminal and pipeline.
Meanwhile, directly opposite information has been received from Baku. Azerbaijan President Geydar Aliyev told journalists that considers the Odesa project “gray.” President of the Azerbaijan State Oil Company Natik Aliyev stated that the Ukrainian oil transport option would be considered as a supplementary one, and the main route for Azerbaijan oil will be Baku-Supsa-Ceyhan. In early August a multinational corporation was created in London to carry out this project with the participation of the US Export Bank, British Petroleum, Lukoil, the European Bank for Reconstruction and Development, and a number of other major companies. The sum agreed upon as investment in the project to send Azerbaijan oil through Turkey was $15 billion, while the Ukrainian government has so far been unsuccessful in finding any moneybags of its own. Construction is slated to begin within two weeks, and the pipeline is scheduled for completion in 2004.
The Ukrainian pipeline has already been built, and the only problem is to find an investor willing to buy the oil needed to start and make preliminary agreements with European buyers. The issue is about a sum considerably less than $15 billion, but the Ukrainian government has thus far still not managed to find its own moneybags. According to information form the Baku media, Vice Premier Dubyna proposed that Azerbaijan join an international consortium envisioned to exploit the Odesa-Brody pipeline, but Azerbaijani President Aliyev refused to offer “his” gas, because the country for the time being has no free resources and proposed that Ukraine buy the oil under commercial conditions after the creation of an international Odesa-Brody consortium.
While Ukraine lacks such funds, it is conducting preliminary coordination of transit fees for Caspian oil to Europe. Late last week such consultations were held with International Oil Company of Georgia President Georgy Chanturiya. After the negotiations, he said that the price for transporting a barrel of oil from Baku to Supsa will be $1.23 and services of the tanker fleet thirty cents, while the cost of transit to the Odesa-Brody line would be $1.00. “Thus we get an overall price not over $2.80-$2.90, which is a very good price,” he considers. Thus one can state that oil transport through the Ukrainian route would be cheaper than the Baku-Supsa-Ceyhan route. But the Azerbaijani decision is influenced by not only economic but political factors. President Aliyev is greatly irritating Moscow by carrying out the pro-American project of supplying oil through Ceyhan, and should he risk openly supporting the Odesa-Brody project as well, it could signal internal political destabilization in Azerbaijan. All the indicators show that in recent times there is nothing accidental in the political agendas specifically for Baku and Tbilisi when it comes to building a Euro-Asian oil corridor.
And in tranquil Ukraine the Odesa-Brody oil pipeline still remains dry. This fall the Ukrtransnafta Company plans to conclude an agreement with a foreign company to act as an intermediary with potential participants in the international consortium. Recall that the creation of such a consortium was long sabotaged by “patriotic indignation.” And Ukrainian law currently forbids both the ownership and management of domestic pipelines to anyone but the state. The cabinet’s bill to lift this prohibition will be deliberated by Verkhovna Rada, most likely late in the fall. And until then it remains highly unlikely that Azerbaijan or any other consortium members will be willing to risk billions of dollars on the Ukrainian transport route for Caspian gas.
