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. Last Updated: 07/27/2016

Tariffs Issue Still Looms Over Future Oil Dealings

Russia and Chechnya remain poles apart on the key issue of oil transport tariffs, oil officials said Wednesday, vastly diluting the impact of a long-awaited agreement signed Tuesday.


Securing the oil pipeline running from the Azeri capital of Baku to Russia's Black Sea oil export outlet of Novorossiisk via Chechen territory is key to Chechnya's war-torn economy and to an oil group due to start output from its Caspian fields soon.


Tuesday's agreement cleared the way for 200,000 metric tons of Azeri oil to get to world markets by the end of the year.


But the absence of a deal on the tariffs Russian oil pipeline monopoly Transneft would pay Chechnya from the start of 1998 means the fate of much bigger volumes from the $8 billion Azerbaijan International Operating Company, or AIOC, is uncertain.


"The question of tariffs next year is undecided, and talks will continue," said Transneft spokesman Alexei Skvartsov. "Tariffs are one of the biggest problems, and yes, we are a long way from a final solution to this problem."


Emir Gantamirov, Moscow representative of Chechnya's oil company, YUNKO, said Tuesday's pact was important because it cleared up all outstanding issues apart from tariffs.


"There were many issues, but now there is just one, thank God," Gantamirov said. "I believe the deal was a big step, because until now there were questions of finance, renovating the pipeline and security. These are now decided."


But the discrepancy is wide between what Chechnya wants and what Transneft is willing to pay for taking oil through the 160-kilometer Chechen stretch of the pipeline.


"Transneft appears to want to pay 10 times less than we want to receive, but our aim is the realistic one," Gantamirov said. "This is what talks are for. It's normal business."


YUNKO president Khozhakhmed Yarikhanov said in Moscow on Tuesday that tariff talks would not be held before December.


Meanwhile, Russian officials warned Wednesday that Chechnya would lose out on an oil transportation deal if it failed to introduce stability at home.


Itar-Tass quoted First Deputy Prime Minister Boris Nemtsov condemning an attack on a bus carrying Russian construction workers on the Dagestan-Chechnya border in which two workers were hurt, according to preliminary reports.


In Tuesday's agreement, Chechnya guaranteed the safety of Russian workers on its territory to repair the damaged pipeline. Transneft said it may not carry oil across Chechnya at all, even if the route is ready and a pact on tariffs is reached.


"Even if the pipeline through Chechnya is ready and the question of tariffs is resolved, there is the question of political stability to consider," Transneft's Skvartsov said.


He echoed statements by Nemtsov that Transneft had eight options for getting oil to world markets, including delivery of "early" Caspian oil to Volga region refineries in return for Russian crude from Novorossiisk.