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. Last Updated: 07/27/2016

In Post-War Chechnya, Oil Is Key to Recovery

GROZNY -- One of the lasting images of the war in Chechnya is of the blazing oil fires blackening the sky over the bombed-out capital. They raged for weeks and it seemed the oil refineries were burned beyond repair.

But in fact two refining units of the sprawling Lenin refinery, a tangle of blackened and silver pipes and steam funnels, survived intact and have been up and running for the last six months.

And surprisingly, Grozny's oil workers were kept busy throughout much of the war, extracting and pumping Chechen crude to Russia's Black Sea port of Novorossiisk.

Now Chechnya's state oil company, Yunko, is using its modest profits to fix up the rest of the war damage. It is trying to protect its monopoly on state oil by clamping down on bootlegging, which sprang up during the war and became a main source of survival for rebel fighters and villagers across Chechnya.

But the larger challenge is restoring the republic's oil processing capabilities.

Grozny's refineries, capable of refining 20 million tons of oil a year and once the main supplier of oil products to the Caucasus, employed 20,000 people before the war. Now there are only 9,000 people on the books, and only a hundred-odd workers appeared to be on-site on a recent Monday.

There is not much for them to do and they are not being paid for their efforts. The two refining units of the former Lenin refinery stood idle because of a lack of power during a visit last month.

Of Chechnya's three power stations, only one is up and running, and the city of Grozny is constantly hit by electricity outages. Valery, the Russian senior engineer of one refining unit, was at his post but admitted that work was intermittent.

"Sometimes it is working half of the month, sometimes less," he said. "Electricity is the main problem -- and a steady flow of [crude] oil."

A huge oil storage tank lies collapsed in soft molten folds, rusted and blackened from a great fire that must have raged for days. It is one of a whole line of storage tanks destroyed in the bombing of Grozny. The surrounding ground is black with oil and soot.

Of the 100 storage tanks perched on the hill above Grozny's vast oil refining complex west of the city, only 24 survived the war. It is just one of the problems undermining efforts to resurrect Chechnya's oil industry, the republic's big hope for future prosperity.

The lack of storage tanks, both for crude oil and refined products, and the damage to connecting pipelines, severely limits the amounts Grozny can refine and trade.

Crude oil extraction was much less affected by the war, with fields located away from the main fighting. Despite fierce battles last year, Chechnya extracted 1.4 million tons from its own oil fields and sent it by pipeline to Novorossiisk, according to Yunko.

That process is about to stop, according to Najmuddin Akuyev, chief engineer of the Grozny refineries, since Grozny can earn more by selling refined oil products.

During the war, Chechnya produced few oil products for export. The refinery was shut for months with each new round of fighting.

But the refinery has been open now for six months. Last month Akuyev sold 15,000 tons of fuel oil, or mazut, and 5,000 tons of diesel to Russia, and once he rebuilds some of his storage tanks he says he will be able to increase that trade. Workers were laying the foundations for six new storage tanks on the hill, while two women workers wandered through the weeds checking the state of the pipes.

Refined products have to go by rail, since virtually all the pipelines are damaged. "We need a huge amount of money to fix the storage tanks and do capital repairs," Akuyev said.

Akuyev, who has worked at the refinery for 22 years, has brought the refinery back on stream three times, after each bout of fighting in Grozny. He appears undaunted by the overwhelming odds facing him. "I have shown I can get things done," he said.

It may seem extraordinary that he can even contemplate resurrecting Chechnya's oil business without massive investment from Russia or elsewhere, but he does. Akuyev laughed when asked if Russia was donating equipment or expertise. "Russia gives nothing free," he said, "and at the moment is giving nothing at all."

"Russia has taken upon itself the obligation of restoring the social and economic spheres of the Chechen Republic, including the oil pipeline," Yunko president Kozh-Akhmed Yarikhanov said in an interview in his Grozny offices. But he, too, admitted that, so far, his company was relying on its own small oil revenues.

Yunko is also trying to protect its oil monopoly from home-grown, war-era refineries. Villagers tap into pipelines that criss-cross the republic or simply dig holes in the ground and find oil. Yunko says the bootleggers are ecologically destructive, and just plain dangerous.

Outside the village of Geldegen, 20 kilometers south of Grozny, men were still operating their makeshift refinery, heating a metal tank full of crude sunk in a hole in the ground.

"The government has closed down some, others have moved elsewhere," said one worker, Elimsolt. "But they know if they close us all down, people will go hungry."

The gasoline they make is cheap and very low grade, but it is the only means of survival for many. Aslanbek Usayev, a sheep farmer, was selling gas out of the back of his truck. On a good day he said he made 20,000 rubles, less than $4.