Grozny Premier Says Oil Industry Healing

GROZNY -- The oil industry in Russia's rebel Chechnya area is slowly recovering after six months of fighting halted production, the region's Moscow-backed prime minister said.

"Despite the war, we were able to preserve about 70 to 80 percent of Chechnya's oil industry infrastructure," Salambek Khadzhiyev said over the weekend. "The first tens of thousands of tons of oil have just been extracted."

Oil production in Chechnya ground to a halt during six months of fighting between Chechen fighters and Russian forces, in which thousands of people died. Much of the region's capital, Grozny, was demolished. The oil now being extracted is from the north of Chechnya, which largely escaped the effects of the war, Khadzhiyev said.

Before war broke out last year, Chechnya produced about 2 million tons of oil a year. At its peak, before Chechnya's rebel leader Dzhokhar Dudayev took power in 1991, the region produced 16 to 18 million tons a year.

Khadzhiyev said the new government planned to increase oil production gradually, although not to previous high levels, which he said had been too damaging to the environment.

"By the end of this year we will get up to 2 million tons of oil, and by 1997 we'll increase that to 4 million tons. We expect to get 10 to 12 million tons of oil per year by the year 2000," he said.

First Deputy Prime Minister Oleg Soskovets told Interfax last week that Chechnya could produce up to 4 million tons of oil this year.

Khadzhiyev also said a major oil refinery in Grozny had escaped the war with little damage, and was under repair.

The refinery, capable of processing between 4 million and 4.5 million tons of oil annually, could start working as soon as August or September, he said.

Oil and gas pipelines crossing the region are also being repaired, he said. About 20 percent of the pipeline network was damaged during fighting but the refit should be complete by the end of the year.

Khadzhiyev said finance for repairing the region's oil infrastructure -- a process which will cost 600 billion to 700 billion rubles ($130 to $150 million) -- has already been earmarked. "Moscow has allowed western Siberia to export 4 million tons of oil," he said. "The taxes on these export earnings will be used to rebuild Chechnya's oil industry."