Russia cancels unsustainable agreement on the transit of Azeri oil

Were 17 years of the contract, provided to Azerbaijan favorable conditions for the transit of oil through Russian territory, broken. The Russian government has taken this decision because of the extreme loss of the agreement. Now finally be covered by market prices, but it is likely, and the fact that Azerbaijan does abandon the project.

Russia breaks the agreement with Azerbaijan on the transit of Azeri oil through Russian territory, which has been operating for 17 years. Such an order on May 5 signed by Prime Minister Dmitry Medvedev. The document was published on Tuesday on the official website of legal information. Medvedev also instructed the Foreign Ministry to inform the decision Azerbaijani side.


"Revenues from transit volumes do not cover the costs of maintaining the Transneft pipeline system in the proper state of technology"

In turn, the State Oil Company of Azerbaijan (SOCAR), said that so far has not received notice of termination of the agreement on transit of oil through the Baku — Makhachkala — Novorossiysk, reports Business TASS.

According to Transneft spokesman Igor Demin, the reason for termination of the agreement — that the last five years, Azerbaijan is pumped through Russian territory more than twice the smaller amount of oil than embedded in the document.

Under the agreement signed in 1996, Baku should carry a minimum of 5 million tons of oil annually by the Baku — Makhachkala — Novorossiysk (capacity of 7 million tons per year). In exchange, the Republic has received a fixed rate of 15.7 dollars per ton of oil per 1000 km. And at the rate is not affected by any legislative changes in Russia, charges at the port, and so on, as everything is already included. And this reduced rate is still in effect.

However, the actual amount of bleeding for five years following the contracted 5,000,000 tons, said Demin. Thus, in 2009 Azerbaijan transported only 2.5 million tons, in 2010 — 2.2 million tons, in 2011 — 1.99 million tons, in 2012 — 2 million tons, and in 2013 the Baku intends to pump is three times less than the contracted amount — 1.6 million tons.

As explained by Demin, revenues from this transit volumes did not cover the costs of maintaining the pipeline system in the proper state of technology. Transneft as a performer also could not change the rate, as its parameters were fixed intergovernmental agreement. Transneft annually loses about $ 50 million a year in this area, said in 2011 President Nikolai Tokarev.

Therefore, Moscow has decided to terminate the agreement. From next year the Azeri oil transportation will be carried out is based on a commercial contract, said Demin.

We can assume that in a commercial contract will no longer be prescribed a fixed discounted rate, and the market. So, as an alternative pipelines in the region — the SCC and the Baku — Tbilisi — Ceyhan — transportation of oil last year, according to expert estimates, the cost in the region of $ 20-25 per tonne at 1000 km.

"Most likely, the fare increase will not by 10-20%, and more serious. Commercial rates should provide the content pipeline. If a normal tube content at fixed rates it is necessary to pump twice the oil, respectively, the commercial value of pumping oil is likely to be set to twice the current price. In this case, the revenue is received, necessary for the maintenance of the pipeline, "- says the director of the Energy Development Fund Sergey Pikin.

"If such tariffs Baku seem too high, it can react decrease in sales volume. Oil pumping even at $ 30 per ton for 1000 km — it is rather big price. May come to the fact that Baku and did refuse pumping oil through the Russian pipeline. In this case, it would be better to freeze the Transneft pipeline "- believes Pikine.

As pointed out by analyst IFC "Metropol" Vitaly Kryukov, Azerbaijan through the Russian pipeline pumps less oil than budgeted in the contract, because of its scarcity. "Baku sends more oil refining to meet growing demand in the domestic market, plus the republic has been a drop of oil," — said the expert.

On the other hand, Azerbaijan is important to preserve this alternative route through Russian territory in the event of problems with pumping via the Baku — Tbilisi — Ceyhan pipeline. In particular, because of the events in Georgia in August 2008, pumping oil through this pipeline was stopped. The question now is who will pay for the maintenance of the Baku — Novorossiysk.

Russia has long disliked the situation with the transportation of Azerbaijani oil at a reduced rate. Attempts were made to reach an agreement to modify the treaty since 2009.

Two years ago, Azerbaijan said that he is ready to increase its own oil supplies through Russia via the Baku — Novorossiysk. However, he requested him to make a change that will allow transport on the Baku — Novorossiysk not only Azerbaijani oil. It would be possible to pump oil from Kazakhstan and Turkmenistan, Azerbaijan is going through transit.

Even last year, there was unofficial information that Russia wants to terminate the agreement with Azerbaijan on oil transportation. Transneft Vice President Mikhail Barkov in March 2012 addressed to the Ministry of Energy to allow us to break this unsustainable agreement with Baku.

Russia has suffered five years of non-performance of contract Azerbaijan, but tore it just now. "From a political point of view I do not see the deterioration of relations with Azerbaijan. No competition in the energy markets with Azerbaijan is also not observed. Rather, the issue is more balance. If earlier losses Transneft on the content of the pipes were mostly on paper, but now the losses are very real, "- says Sergey Pikin.

However, one can not rule out that Russia did not like the desire to help Ukraine to Azerbaijan to get rid of dependence on Gazprom gas. At the end of last year Baku promised to start gas supplies to Ukraine from its field "Shah Deniz-2" at the end of 2017. In the first stage shipments will reach nearly 2 billion cubic meters a year and gradually increase to 5 billion cubic meters. And then will be considered for deliveries to Ukraine and more Turkmen gas through the pipeline TANAP

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