Kiev Seeks Alternatives to Russian Oil

KIEV -- Ukraine, both a consumer and conveyor of Russian oil, has taken its first steps toward diversifying supplies after five years of efforts aimed at reducing its dependence on its giant neighbor.

Kiev's energy debt stands at $3.5 billion and some officials fear Moscow might use the arrears as a political bargaining chip in quarrels over division of the Black Sea Fleet, Russian claims to the fleet's base in the Ukrainian port of Sevastopol and other disagreements over former Soviet assets.

Three non-Russian options are under consideration, not only for domestic consumption but also for the transit tariffs they will generate if Ukraine can export more outside oil to Europe.

Olexander Sverdlov, head of the transport department at the State Oil and Gas Committee, said Azerbaijan had agreed to supply Ukraine with 1 million tons of oil this year.

The oil would be delivered by rail across Azeri and Georgian territories to the Georgian Black Sea port of Poti and then by a newly opened ferry link to Ukraine's port of Odessa.

The second option foresees deliveries of Iranian and Iraqi oil by way of Turkey when construction of a planned 650-kilometer pipeline from a Mediterranean oil terminal near the city of Ceyhan to Turkey's Black Sea port of Samsun is completed.

Sverdlov said Ukraine and Turkey were conducting a joint search for investors for the $1.8 billion project, with hopes for help from European financial institutions and private investors.