Russia grasps its big prize of Chechen oil

By Giles Whittell
Source: The Times
Date: February 10, 2000

THREE days after raising its flag in Grozny's last rebel stronghold, Russia is claiming the richest prize of the war: Chechnya's potential as a conduit for the vast oil wealth of the Caspian basin.

In a postscript to a flood of announcements on its newly "liberated" province, the Kremlin has assigned the right to extract and exploit Chechnya's oil and gas reserves to Rosneft, Russia's last big state-owned oil group.

Russia has promised to cut its 93,000 force in Chechnya by nearly half. Valery Manilov, first deputy chief of Russia's general staff, said: "There will be about 50,000 troops left, and they will be mainly paratroops, marines, and rapid-reaction forces."

The annexation of Chechnya's oil may yet hit obstacles - Rosneft has already been forced to seek a special licence to drill there. Nevertheless, the move was being seen as an unmistakeable signal that Russia now means to exact a swift return in oil revenues and regional prestige.

"This is a case of Russia re-establishing its historic dominance of the region," James Henderson, chief oil analyst at Renaissance Capital, in Moscow, said. "Moscow is saying 'there are assets in Chechnya and we, Russia, are going to control them'."

One analyst in Moscow put Chechnya's untapped reserves last month at 60 billion tonnes, equivalent to much of the Middle East's remaining supply. Most experts believe that the region's wells are uneconomic and its status as a player in the global oil business rests on its position straddling a key pipeline linking the Caspian to Russia's biggest Black Sea oil terminal, at Novorossiisk.

What is clear is the importance that Russia attaches to rebuilding the Chechen oil industry that it has spent much of the past five months bombing. Even as the wells and refineries that ring Grozny continue to burn at a rate of 400 tonnes of oil a day, a succession of delegations has flown in from Moscow to assess the damage and set production targets.

As one expert said: "Access to the Caspian has been the reason for Chechnya's importance. Why else did Hitler try so hard to conquer it?"