The problem of filling the Odesa-Brody oil pipeline, built over a year ago but still in fact idle, is again in the focus of political and economic discussion, for this is a question of big oil, big money, and big politics. Asked by journalists, President Leonid Kuchma recently said it was possible and necessary to continue construction as far as the Polish city of Gdansk. He also noted that Poland, which has always shown interest in the continued construction of the pipeline, has taken “no real steps” to this end. The president seems to have decided to spur our “strategic” neighbor, announcing that he hasn’t yet turned down proposals from oil companies to reverse the pumping of Russian oil from Brody to Odesa. According to Pres. Kuchma, among the companies seeking to take part in this project is the Russian-British TNC, which is 50% owned by British Petroleum.
This information was supposed to make Ukraine’s strategic allies express their intentions, which they promptly did (see the comments by US, German and Polish ambassadors on the page one).
People’s Deputy Anatoly Onyshchuk, member of the Ukrtransnafta (Ukrainian Oil Transport) board, says that such technological options for the Odesa-Brody oil pipeline as reverse pumping should be assessed, above all, from the standpoint of our own economic benefit: “If everything points to the fact that, taking into account the overall dynamics and possible orders for Ukrtransnafta, we should accept this mechanism so that this project doesn’t lose money, and I would agree to this.” According to him, the Ukrtransnafta board has recently discussed the company’s performance and pointed out an overall tendency towards reduced supplies of oil via pipelines. Russia is seeking alternatives and not without success. Thus if it were proven that the reverse pumping of oil is commercially viable and conducive to higher revenues, he would support it. As to the purely political aspects and risks, this country’s political elite is obliged by its very nature to promote our goods and services on the markets of other countries so that Ukrainian companies could make profits, he said.
People’s Deputy Stepan Khmara opposes reverse pumping, though. In the deputy’s opinion, there was no point in building the pipeline at all if we opt out for “the reverse.” The very idea and essence of building the Odesa Oil Terminal and the Odesa-Brody-Gdansk pipeline was to be able to receive oil from alternative sources and eliminate Ukraine’s dependence on Russian sources. This, however, is not in Russia’s interests, which seeks to monopolize oil and oil product supplies to Ukraine and thereby exert economic and political pressure. This is why Khmara claims Russia is out to persuade our leadership that the pipeline should be used for the purpose under discussion. “I categorically oppose it,” he said, “because this would only exacerbate the situation in Ukraine: we have paid the price but will get losses, not gains, by cutting ourselves off the alternative oil sources.”
People’s Deputy Yuly Ioffe told The Day he saw no risk whatever in implementing the Odesa-Brody reverse-pumping project. The deputy is convinced the main problem to be solved is filling the pipeline. Today, “the money lies buried in the ground, and if we begin using [the pipeline], it will gradually pay off,” he believes. “This is why we must speak not about risks but about favorable economic conditions within the limitations of the current political situation... This structure will no longer lie idle; it will begin to do good.” Commenting on the ambassadors’ caution, Mr. Ioffe said, “I think — this is my personal view — the decisions have been already made.”
Petro Oliynyk (Our Ukraine), member of the parliament’s Committee on Fuel and Energy, believes it is a very grave political and economic risk to try to solve the Odesa-Brody pipeline problem by means of back pumping. In his view, the oil pipeline was built in order to establish a competitive climate for and diversify fuel imports. Failing that, the deputy is convinced that we would be “monopolized by one fuel supplier and could wind up in still greater political and economic dependency, which will eventually be reflected in prices.” Mr. Oliynyk thinks back pumping is “a very negative factor because the oil pipeline was built for a dif ferent purpose.”
COMMENTARY
Oleksandr SUSHKO, Director, Ukrainian Center for Peace, Conversion, and Foreign Policy:
“One must keep in mind the purpose for which the Odesa-Brody oil pipeline was built. If it was built to earn a little money, you may use the pipe as you please, even by turning it into an aqueduct. But, as I see it, such a large investment of Ukrainian tax money was aimed at establishing Ukraine’s energy security by diversifying the routes of oil supply to Ukraine, at preserving and developing this country’s fuel transit capacity. So if the project is to serve the interests of big Russian monopoly capital, this would be the complete opposite of the original purpose for building it
“The urgent task of today is to lobby for the project as soon as possible and create conditions which would attract investors who produce oil in the Caspian Basin so that the Polish part of the pipeline is built in the shortest possible time and the pipeline itself is used for its original purpose.
“Russian proposals on reverse pumping might make it possible to enhance budget revenues in the next few months, but even simple economic assessment shows this will not make it possible for the project even to pay for itself. The Black Sea Basin demand for oil is not so great to require pumping it continuously from Brody to Odesa. I understand the attitude of Russian business circles and their lobbyists in Ukraine, who are interested in seeing their long-term economic interests served. Still, this is the strategic problem of Ukraine’s energy security. The key factor of our state’s insecurity in this realm is its dependence on only one supplier of energy resources. Any attempts to redesign the Odesa- Brody oil pipeline project will mean undermining the status quo and our prospects.”
Serhiy TOLSTOV, director, Institute of Political Analysis and International Studies:
“The Odesa-Brody pipeline project is an element that balances the Russian vector in Ukrainian politics because it links Ukraine to Central European cooperation schemes. If it becomes possible to pump a certain quantity of Caspian oil from Odesa to Brody, no Russian reverse will be needed. But if the pipeline remains idle, it must obviously be put to any use whatever — otherwise the pipe will just rust away. In my opinion, the Ukrainian side’s statement about discussing the idea of Russian back-pumping is also an impulse to stimulate our dialog with Western partners.
“The statements of US, German, and Polish ambassadors presented, for the first time in more or less official form, Washington’s official standpoint. Earlier, under President Bill Clinton, whenever the Odesa-Brody pipeline issue was raised, Washington showed no reaction at all, although it chose to officially support the Baku-Ceyhan project by holding, among other things, a presidential summit of Georgia, Azerbaijan, and the USA.
“Poland provides full diplomatic support to the Odesa-Brody project, but Warsaw notes that the Ukrainian side delays presenting specific business plans. At the same time, the last year’s scandal involving the management of the Poland’s Golden Gate Company made it virtually impossible for the government to fund the pipeline construction on Polish territory at the moment. This makes it necessary to attract private commercial capital. If the three ambassadors’ comments were followed by clear-cut statements by their governments that would encourage the inflow of capital, the issue would be settled quite rapidly and favorably.
“What is also required is formation of expert groups represented by these countries’ economy ministries and private companies interested in launching the project. It is also very important that Ukraine, which has invested big money in the Odesa-Brody oil pipeline, should not receive a negligible share at the end, as it did in the Sea Launch project.
INCIDENTALLY
The EBRD has announced willingness to be involved in implementing the international gas transit consortium and Odesa- Brody oil pipeline projects “ by way of extending both credit and investment,” said Oleksandr Chaly, state secretary of the Ministry of Foreign Affairs of Ukraine, commenting on Ukrainian Prime Minister Viktor Yanukovych’s scheduled visit to London. “A serious statement was made by bank president Jean Lemierre who said they wanted to participate in both in the gas consortium and in the Odesa-Brody-Gdansk project, and they expect the Ukrainian side to put forward concrete proposals,” Mr. Chaly said. We will undoubtedly learn more details about this complicated discussion.
