Based on a report by Platt's, the government-owned Russian company (Transneft) is currently reviewing a plan to establish an oil pipeline to export the Russian oil through Kazakhstan, Turkmenistan and Iran to the Persian Gulf.
Recently, a Transneft spokesman has announced that Azerbaijan, too, can export its oil through this trunk line. Tranneft has added that the bulk of the pipeline to be established will use the current pipelines.
The spokesman added: For exporting the crude oil of the Central Asia to the export terminals of Iran, a new pipeline can be established and there would not be any need to construct Baku-Ceyhan pipeline which has received the U.S. support.
It is not clear whether the announcement of this plan was a promotional ploy by Transneft to upstage the Baku-Ceyhan plan, especially after the shuttle diplomacy of the U.S. special envoy in the Caspian, John Wolf, in the region and the announcement of the tender bids for the feasibility studies of this plan in Turkey.
At any rate, the analysts did not show any special reaction to this news, although the proponents of Baku-Ceyhan plan rejected the Transneft plan.
Whatever the motivation behind the Transneft offer, it is of great importance, especially if Russia has serious plans to transfer its oil and the oil of the regional countries to the world market via Iran.
This will have far-reaching effects, some of which will be discussed below:1. It does not seem logical that Russia would participate in a plan which would be a rival to Baku-Novorossisk at a time when there is not sufficient oil to make it economically feasible, unless Russia is determined to export its oil through the Persian Gulf in order to reach new markets.
2. Russia has always dreamed of access to the warm waters of the Persian Gulf, and Moscow has always been looking for ways to fulfill this dream.
The Transneft plan is compatible with the measures adopted by new Russian President Vladimir Putin who follows clearer strategies in the energy field.
3. So far the market for Russia's crude oil has been mainly extending westward and limited to Europe. By exporting its oil through Iran, Russia can offer Urals crude (Russia's benchmark oil) at the entrance to the Persian Gulf.
The Urals crude is a heavy oil with high sulphurate content. Offering of this oil to the markets west of the Suez Canal is becoming more and more difficult each day because of environmental protection laws and imposition of new standards.
Hence, if Russia can offer its oil to the Asian clients, who are less sensitive to such issues, it will achieve a remarkable success in marketing its crude oil. One of the potential customers of Russia is India with which Moscow enjoys very strong ties.
4. Russia and Caspian Sea's littoral states will earn higher revenues by exporting their oil through Iran because on the one hand the world demand for oil will increase through the rising demands of the Southeastern Asian states, China and India.
On the other hand the pricing of oil in this market is such that the value of the crude oil is two dollars more than that in the European market.
This difference compensates for some of the costs of the transfer of oil and will also prevent negative competition in Europe.
5. Some might imagine that, considering the vast expanse of Russian territory which connects it to countries in eastern Asia, Russia would not need to transfer its oil through the Persian Gulf, if it decides to enter the Eastern markets.
But one has to take into account the following factors in order to find what may motivate Russia in transferring its oil through the Persian Gulf: A more accurate estimation of the distances, the places where Russia's oil reserves are located, the networks of pipelines, the existing infrastructure, the economical nature of transfer of oil through oil tankers at sea, and the fact that such tankers can reach diverse markets.
6. The arrival of Urals crude at Persian Gulf will transform the order of Persian Gulf and Far East Asia oil market. It is possible that the arrival of Urals crude will change the exportation share of each Persian Gulf oil producer.
Also the fact that Russia will offer its oil in the Persian Gulf will have a significant effect on the political, economic, strategic and security equations in the Persian Gulf.
At any rate, the offer by Transneft has very important points. It will have far-reaching ramifications and will manifest its significance in the future, and there is the likelihood that in the near future the oil officials of Iran and Russia will hold more serious talks in this connection.
Source:www.iies.co.ir.com
© 2000 Mena Report (www.menareport.com)
