On May 19, Ukrtransnafta President Oleksandr Todiychuk submitted his resignation. After President Kuchma called off Ukraine’s special negotiator for the Eurasian Oil Transport Corridor (EOTC), Todiychuk has been left with almost no powers and possibilities to implement this project. According to a staff source, Todiychuk’s powers were restricted significantly with his dismissal as Ukrtransnafta Chairman of the Board and appointment as the company president last September. Now that the special EOTC negotiator has been called off, “they have begun to dismount the project management vertical,” which mostly ensured its development, the source said in an interview with Interfax-Ukraine. It will be recalled that under the relevant presidential order, the Cabinet of Ministers is to further coordinate this project. The presidential press service said that the fact that Ukraine had a special EOTC negotiator “did not add to the effectiveness of operation of the international oil transport system.” The press service further said, without bothering to identify the cause and effect relations, that despite the countless resolutions of the cabinet and Fuel and Energy Ministry, commercial operation of the Odesa-Brody oil pipeline had not begun since 2002 through April 2004. Logic suggests another conclusion: if everything continues the way it is going, it will not begin at all, since Todiychuk stood very much in the way of those who intended to reverse the oil flow in the Odesa- Brody pipeline from Brody to Odesa, filling it with Russian and not Caspian crude.
Meanwhile, US Ambassador to Ukraine John Herbst believes, as before, in the expediency of direct operation of the Odesa-Brody pipeline, and made a statement to this effect in Kyiv last Tuesday. “I think that the arguments in favor of direct operation are economically justified,” he told journalists. He further opined that direct operation of the pipeline would facilitate closer ties with European countries. “Ukraine wants to be a part of Europe and participate in European organizations. Direct operation of the Odesa-Brody oil pipeline would facilitate this,” he said. To quote Ambassador Herbst, if oil is backpumped from Brody to Odesa, oil tankers would have to be used to further transport it via the Bosporus, which is congested. “Between 25 and 30 tankers pass through it daily,” he noted. The ambassador further spoke of his talks with oil suppliers, who said that it would be unprofitable for them to backpump oil. “Ukraine will not even have short-term benefits from reverse operation,” he summed up.
However, that same day another diplomat, Kazakh Ambassador to Ukraine Amangeldy Zhumabayev, suddenly voiced his Eurasian opinion: “As of today, Kazakh oil companies have all of their oil earmarked under contracts with their partners. Kazakh companies have certain commitments under these contracts, which cannot be violated.” The ambassador further noted that the governments of Ukraine and Kazakhstan can facilitate the Odesa-Brody project at the political level only, while the tangible steps for the project should be made by oil companies.
Mr. Ambassador should be reminded in this connection that on April 29 Reuters released a report to the effect that a group of Kazakh oil companies considers the Odesa-Brody route “profitable” and in the latter half of 2004 could begin supplies that would take up to six million tons of oil per year to Europe. Speaking in an interview with Reuters, Kazmunaigaz State Oil and Gas Company Managing Director Kayirgeldy Kabyldin said, “I believe supplies will begin in the latter half of this year. We are talking of six million tons per year,” adding that “Currently, a group of companies interested in supplies are completing commercial talks with oil refineries in South Europe, in the direction of Austria, Slovakia, Germany, the Czech Republic, and they have already reached, so to speak, preliminary arrangements.” To quote Kabyldin, mostly Tengizshevroil Company (among its shareholders are ChevronTexaco and ExxonMobil, British BP, Kazakh Kazmunaigaz, and Russian Lukoil), which extracts oil from the gigantic oil deposit Tengiz in Western Kazakhstan, and Kazmunaigaz Trading House Company are willing to begin oil supplies. “An economic feasibility study has confirmed the profitability of this route,” Kabyldin said. He noted in his speech at a recent oil conference that Odesa-Brody could enable Kazakh oil companies to supply light crude oil to European markets, while the Russian pipeline network does make it possible to fully preserve the quality of hydrocarbons. This past March, a representative of the Kazakh Ministry of Energy and Mineral Resources said his country was willing to become a shareholder in a possible consortium to extend the Odesa-Brody pipeline to the Polish town of Plock. “Obviously, now we must sign contracts and begin supplies,” Kabyldin told Reuters.
It will be recalled again that at one time Ukraine’s president entrusted the Cabinet of Ministers with addressing all issues relating to the Odesa-Brody pipeline. Recently he returned to this idea. “As far as I am concerned, let Andriy Kliuyev (vice premier for the Fuel and Energy Complex — Author) answer these questions — he is the one responsible for filling the pipeline [with oil],” the president said. On May 12, Kliuyev reported to the president and on the following day openly told a news conference that Odesa-Brody would have been launched long ago if he had the right to make decisions. Technical issues relating to the pumping of oil via Odesa-Brody have been solved, bank guarantees for the purchase of technological oil have been received, while the launch of the pipeline is stalled because of a delay with the signing of relevant contracts by Ukrtransnafta management, Kliuyev said. He further stressed that Ukrtransnafta, as a transport company, does not intend to buy or sell oil. “There are drafts of pump-or-pay contracts; there are bank guarantees for $100 million for the purchase of technological oil. We need to sign these papers and begin work,” he stated.
Recently, this author had the pleasure to talk off the record with a first secretary in one of the embassies, whom he reproached jokingly that his country did not even lift a spade to extend the pipeline. What else do you expect us to do, the diplomat retorted seriously, if you, Ukraine, have yourselves thrown this spade to Russia?
