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. Last Updated: 07/27/2016

Chechnya Shuts Oil Link to Russia




Citing payment delays, Chechnya has shut off the main oil pipeline traversing its territory, cutting the Baku-Novorossiisk link, officials said Tuesday.


Russia owes 100 million rubles (just over $4 million) for oil pumped through the pipeline, said a spokesman from the press office of the presidential administration in Grozny.


"Russia has not paid its debts to us for seven months," Musa Nugayev said, in a telephone interview Tuesday.


Nugayev said the money at least partly goes to pay guards stationed along the pipeline, which runs from the Azeri capital of Baku to the Russian port of Novorossiisk on the Black Sea. The guards have recently threatened to stop working because they haven't received salaries.


A spokesman for the Fuel and Energy Ministry confirmed that Russia owed Chechnya for the oil, but could not say how much.


The shutdown will not slow production by the Azerbaijan International Operating Company, or AIOC, the consortium responsible for most of the oil shipped through the pipeline, an AIOC spokesman said.


The consortium is shipping some of its 100,000 barrels-per-day output through a newly opened western route to the Georgian port of Supsa and is storing the rest at the Sangachal terminal south of Baku, according to Crawford Gordon, AIOC's spokesman in the Azeri capital.


"We are currently running at less than 30 percent of storage capacity, so there's no immediate danger of running out of space," Gordon said.


AIOC is a consortium of 12 companies, including BP-Amoco - with 51 percent of the venture - LUKoil and the Azeri state oil company, SOCAR.


Analysts said the shutdown likely would have little long-term impact, other than speeding the construction of alternative routes around Chechnya.


"The [shutdown] in itself is not too serious," said Ruslan Nickolov, an oil analyst at Nomura International in London. "Whether the Chechen authorities are using it as a pretext for something bigger is another matter."


Nickolov noted that there had been "worrying reports" recently from the republic of possible terrorist excursions by Chechen field commanders into Russia. He was quick to add, however, that such reports were unconfirmed.


"Eventually, this kind of hinderance will cause one of two things," he said. "Either it will prompt Transneft to accelerate the construction of a detour around Chechnya or it will make the AIOC focus on alternatives like [the pipeline to] Supsa," he said. "Maybe both will happen."


Tensions between Moscow and Chechnya, which fought a bitter and bloody war for independence from Russia in 1994-96, have been on the rise recently following a series of high-profile kidnappings in the republic.


Earlier this month, Russia expressed outrage over the kidnapping of Major General Gennady Shpigun, an Interior Ministry representative, who was taken from his plane by gunmen as it taxied down the runway at Grozny airport. Shpigun remains a captive.