ANALYSIS: Russia wants to pump through Odesa-Brody pipeline 'in reverse' (08/10/03)

ANALYSIS

Russia wants to pump through Odesa-Brody pipeline 'in reverse'

by Jan Maksymiuk
RFE/RL Poland, Belarus and Ukraine Report

Russian Prime Minister Mikhail Kasyanov on July 17-20 spent four days in Crimea where he held meetings with his Ukrainian counterpart Viktor Yanukovych, at a sitting of a Russian-Ukrainian commission on cooperation and in more informal circumstances. It was expected that the main result of the meetings would be the signing of an agreement on the transit of Russian oil through Ukraine in 2004-2018, in the amount of 79.5 tons annually. However, this did not take place.

Mr. Kasyanov explained to journalists that the delay was due to uncertainty about the use of the Odesa-Brody oil pipeline. "Russia is expecting that the [oil-transit] agreement will encompass all Ukrainian oil pipelines, including the Brody-Odesa. When we solve this issue, we will sign the agreement," Mr. Kasyanov said. He expressed hope that this issue would be solved in a month.

Moscow expects that the Odesa-Brody pipeline, which was constructed to transport Caspian (Kazakh and Azerbaijani) oil to Europe, can be used in a "reverse mode," to pump Russian oil to Odesa in order to ship it further across the Black Sea. Thus, according to Ukrainian commentators, the Kremlin wants to prevent Ukraine from opening a new, independent oil-transportation route as well as to tie Ukraine's oil-transportation system to Russia even further. According to this line of argument, by delaying the signing of the prepared oil-transit agreement Moscow intends to force Kyiv into agreeing to the use of the Odesa-Brody pipeline "in reverse."

Russia's Tyumen Oil Company (TNK) proposed to the Ukrainian government in June the creation of a working group to study the possible use of the Odesa-Brody oil pipeline in the "reverse mode." President Leonid Kuchma seems to be pondering the idea of pumping Russian oil from Brody to Odesa until it becomes possible to pump Caspian oil to Europe.

He said on June 24 that Ukraine will not use the Odesa-Brody pipeline in the reverse direction if the European Commission takes "specific steps" to use the oil pipeline in its planned direction. He did not elaborate but observed that the problem with the Odesa-Brody pipeline "perfectly characterizes the Ukrainian mentality." "First we did it, and then we asked ourselves - why have we done this?" he said. The use of the Odesa-Brody pipeline for pumping oil in the "reverse mode" reportedly could bring Ukraine an estimated $60 million in annual revenues.

Meanwhile, Ukrainian Fuel and Energy Minister Serhii Yermilov said on July 14 in Gdansk, at a meeting of Ukrainian and Polish officials and corporate representatives, that the Odesa-Brody oil pipeline will be used exclusively in accordance with its original purpose. Poland's Pern and Ukraine's Ukrtransnafta signed a protocol at the meeting on creating a joint venture to complete the Polish stretch of the Odesa-Brody-Gdansk pipeline.

"The European direction is the most profitable. ... It means 40 million tons of oil to be pumped annually,... while the reverse use could transit only up to 9 million tons," Mr. Yermilov reportedly said in Gdansk.

It is also noteworthy that outgoing United States Ambassador to Ukraine Carlos Pascual in his farewell speech in Kyiv on July 21 touched upon the Odesa-Brody pipeline, stressing that Ukraine has a "phenomenal opportunity" with the development of this oil-transportation route according to its original design. "Today there are interested buyers in Germany and in the Czech Republic, there is a mechanism to get that oil there through the pipeline route of Odesa-Brody linking into the Druzhba system, there are suppliers from the Caspian who are interested in providing the oil," Mr. Pascual said.

"Indeed, some of the European refineries are already buying the very same oil, bringing it through the Bosporus, up through the Mediterranean to Trieste and to a pipeline. Ukraine has been able to demonstrate in its market analyses that it can do this more cheaply, through Odesa-Brody," he observed.

The Our Ukraine bloc said in a statement on June 24 that the use of the Odesa-Brody oil pipeline to pump Russian oil from Brody to Odesa would run counter to Ukraine's national interests. The statement called on President Kuchma to take a clear stand on using the pipeline exclusively in accordance with its original design.

However, Ukrainian commentators point out that there is no unanimity of views regarding the pipeline even within Our Ukraine. For instance, Taras Stetskiv and Viktor Pynzenyk, prominent members of the Our Ukraine parliamentary caucus, think that the primary thing is revenue, therefore the Odesa-Brody pipeline may well be used for pumping Russian oil in the reverse direction.

Jan Maksymiuk is the Belarus, Ukraine and Poland specialist on the staff of RFE/RL Newsline.

| Home Page |