Weapons of Mass Destruction (WMD)

DATE=01/09/03

TYPE=CORRESPONDENT REPORT

TITLE=RUSSIAN CASPIAN OIL (LO)

NUMBER=2-298215

BYLINE=BARRY WOOD

DATELINE=WASHINGTON

CONTENT=

VOICED AT:

INTRO: Energy specialists Thursday at a forum in Washington examined the outlook for increased exports of Russian and Caspian Sea oil. V-O-A's Barry Wood reports.

TEXT: Amy Jaffe, an energy analyst at the James Baker Institute in Houston, says weather and logistics make it unlikely that Russia can quickly boost its oil exports. She says because of severe winter weather, Russian exports are likely to fall over the next few weeks. However, she believes Russian exports will rise substantially over the next 12 months.

The discussion at the Carnegie Endowment examined recent developments in building the pipelines that would bring more Russian and central Asian oil to Western markets. While in the past Russia regarded Kazakhstan as a rival supplier, more recently it has become more cooperative. Martha Olcott is an energy researcher at the Carnegie Endowment.

///OLCOTT ACT///

Russia's key goals in the Caspian are to assure as much transit through Russia as possible, and as much Russian ownership of assetsboth through a favorable division in the Caspian (sea) and, especially in Kazakhstan, of Russian partnership in key projects.

///END ACT//

Western oil companies have invested heavily in Kazakhstan and are building an export pipeline from Baku in Azerbaijan westward across the mountains to Ceyhan on the Turkish Mediterranean coast. Russia meanwhile relies on its Black Sea port of Novorossiysk for its central Asian oil exports. Turkey worries about an increasing number of oil tankers passing through the narrow Bosporous strait adjacent to Istanbul. Amy Jaffe says one way to ease the pressure on the Bosporous is to reverse the flow in the pipeline that currently carries oil from Slovenia north to Hungary.

///JAFFE ACT///

That system with a very small investmentin the couple hundred million dollars category, not in the billion dollar categorycould be bringing a lot of Russian exports out to the west in a way that didn't involve Turkey at all.

//END ACT///

There is unused capacity in Soviet era pipelines from Russia to Slovakia and Hungary.

Russia has been steadily boosting its hard currency earnings from oil exports. The oil market is currently unsettled with prices at a multi-year high. There is uncertainty concerning the possibility of war with Iraq and its impact on both supply and price. (signed)

NEB/BDW/MR