Azerbaijan bullish as it invites Russia to new oil transit talks

By bne IntelliNews May 16, 2013

bne -

Azerbaijan took an agressive stance on May 15, as the head of the State Oil Company of the Azerbaijan Republic (Socar) said it is ready to discuss a new oil transit agreement with Russia following the cancellation of an existing deal - but only under the right terms.

The Russian government announced on May 14 that it has cancelled a long-standing agreement to transport Azeri oil across its territory, accusing the country of failing to ship sufficient quantities. Rovnag Abdullayev, said on May 15, that Azerbaijan is willing to talk over a new contract, but claimed at the same time that Azerbaijan has other options for oil exports, and that the country is not reliant on Russia as a transit route.

"The company will continue oil deliveries if the new conditions for Socar are economically suitable," Abdullayev told journalists in Baku, according to Reuters. "If they are economically unsuitable, deliveries won't take place," he warned.

Moscow said it was pulling the contract, signed in 1996, which allowed Azerbaijan to pump oil via a 1,330km pipeline running from Baku to Novorossiisk on Russia's Black Sea coast. Under the terms of that deal, Baku had agreed to have exports of at least 5m tonnes of oil a year routed through the pipeline by 2002. However, it currently pumps no more than 2m tonnes.

Abdullayev insisted that while Socar is ready to discuss a new deal with Russia, there will be "no problems with oil exports" if no agreement is reached. "We have the Baku-Tbilisi-Ceyhan route, Baku-Supsa, and a railway," he told journalists.

Meanwhile, Russian pipeline operator Transneft says it will continue pumping Azeri oil this year but may change its terms of transit in 2014, possibly by introducing a "pump or pay" regime.

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