Ukraine sees itself as central player in new oil transportation route (09/13/98)

Ukraine sees itself as central player in new oil transportation route

by Roman Woronowycz
Kyiv Press Bureau

KYIV - Ukraine looks positioned to become a central part of a major transportation route for oil from the Caspian Sea to Europe, after a two-day conference in Baku, Azerbaijan, held to develop a transportation corridor from Asia to Europe through the Caucasus.

A Ukrainian delegation headed by President Leonid Kuchma returned from the conference of 32 European and Central Asian nations regarding an Asia-Caucasus-Europe transportation route waxing confident that by the end of the year Ukraine will have convinced Azerbaijan that Caspian oil should flow to Europe through Odesa and a Ukrainian pipeline into Poland and Western Europe.

The September 7-8 conference sponsored by the European Union was called "The Return to the Historic Silk Road," an allusion to the ancient trade route by which Asian goods were brought to European markets. Although the attendees of the Baku conference were there to review routes for all types of transportation from Asia through the Caucasus to Europe, the overwhelming emphasis was on oil routing.

Ukraine's First Vice-Prime Minister Anatolii Holubchenko said at a news conference after the delegation's return that Ukraine had demonstrated that it was most ready to step in as a player in oil transportation, "The most specific and practical plan, and the best prepared, was the Ukrainian one."

Transportation Minister Ivan Dankeych, who was also present in Baku added, "I can assure you that the majority of European countries present supported our initiative."

President Kuchma told reporters in Baku on September 8, after his meeting with President Gaidar Aliyev that the Azerbaijani head of state also supports the Ukrainian pipeline proposal "in principle," according to Interfax-Ukraine.

Trying not to sow seeds of conflict among the nations competing for the oil pipeline, President Kuchma added that he believes several routes are needed and that the Ukrainian pipeline would be "the golden middle."

In his official presentation to the delegates President Kuchma said that a Ukrainian pipeline was most practical and least expensive. He explained that the Ukrainian route is the shortest way to Europe, by means of the Black Sea and the Baltic Sea and that by utilizing such a route, $8 to $10 could be saved per ton of crude. In addition, part of the Ukrainian line is already finished, he said.

President Aliyev will decide by the end of the year by which route Azerbaijan's Caspian oil will flow to Western Europe.

Ukraine is proposing that Caspian oil be hauled from the Caspian Sea to the Georgian Black Sea port of Supsa, and then transported via tanker across the Black Sea to Odesa. There oil could be stored at the mostly completed Odesa oil terminal before being transported via rail to the Ukrainian city of Brody. From there the crude would move on to Poland and Western Europe.

Several other plans were pitched at the conference. A Turkish plan would have Caspian oil transported through Georgia and the Black Sea to the Turkish port of Samsun. There it would go overland to the Mediterranean and on to European markets. Another, rather vague plan called for oil to be shipped across the Black Sea to Romania and then to Bulgaria and into Central Europe.

The Russian delegation proposed that the oil go to the giant Russian oil terminal at Novorosiisk.

According to First Vice-Prime Minister Holubchenko, that plan did not go over well with the conferees because high-grade Caspian oil would then be mixed with low-grade Russian crude, thus lowering its market value.

However, the head of the Russian delegation at Baku, Deputy Transport Minister Yevgenii Kazantsev argued that the Russian proposal is the cheapest.

Ukraine surprised many at the Baku conference not only by coming well-prepared but with the news that more than one-third of the oil pipeline is completed.

Ukraine has already invested 158 million hrv (about $90 million U.S.) for the pipeline from Odesa to Brody and needs an additional $140 million or so to complete it. Mr. Holubchenko said that 32 kilometers of pipeline are buried and complete, 351 kilometers are nearing completion, and that the additional pipeline materials to complete the project have been purchased.

He also gave assurances that the completion of the Odesa oil terminal, which has lain dormant for several years for lack of financing, would proceed with or without the support of the European Bank for Reconstruction and Development. The EBRD has withheld financial aid for the Odesa oil terminal until Ukraine could show that the project had economic viability.

"In October the EBRD and Azerbaijan's president will be shown the oil terminal and the pipeline to get a first-hand look at what we have done," said Mr. Holubchenko.

Ukraine has said that it can complete all aspects of the oil transportation route without foreign investment, but has underscored that it would like financial support. President Kuchma is working to form an international consortium that would include multinational corporations with stakes in Caspian oil.

Oil was not the only thing on the minds of government leaders and official observers at the Baku conference, the idea for which came after a 1993 meeting in Brussels, Belgium, between European Union and CIS leaders during which the Commonwealth of Independent States proposed an Asia-Caucasus-Europe transportation corridor. At that time the EU agreed to fund the TRASECA project, as it is called. The project calls for the development of all forms of transportation along the corridor, including rail, motor and maritime transportation.

After two days of deliberations in Baku, a multilateral agreement and four technical documents were signed to develop the transportation corridor and a customs regime for it. The agreement also provides for the creation of an interstate commission and a leading body for the implementation of the TRASECA project, whose headquarters are to be in Baku.

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