‘ The idea of employing the oil pipeline from Tikhoretsk to Baku for transporting Russian oil to Baku refineries is rather a discussed matter. It is both convenient, as Baku can fully load its refinery, and beneficial for Russia, in terms of providing its southern regions with petroleum products,’ says Igor Yushkov, expert at the National Energy Security Fund and Professor at the Financial University under the Government of the Russian Federation in his interview to AzVision.az.

He believes Russia is going through a fuel crisis.

'We have had price hikes in summer and autumn. Southern Russia suffered from fuel shortage. On the other hand, Russia has several obstacles to carry through the project for exchanging raw materials for oil products. We must first restructure the entire oil transportation network. We currently receive oil from Kazakhstan in Makhachkala and pump it further to Novorossiysk. If we are willing to employ the Tikhoretsk-Baku pipeline, we will have to forgo the Kazakhstani oil. It is quite sulphurous, heavy,and challenging to move to the Baku refinery, as it is configured for a different type of oil. We will have to stop importing oil from Kazakhstan, which translates to direct losses, as Russia earns transit incomes for large amounts of transported oil, up to 3 million tons a year.

This will not resolve the issue of domestic fuel for Russia. We boast excess capacity to produce diesel and gasoline. The shortage arises due to distortions in the regulation of the fuel market, rather than not having enough refineries. The biggest portion of oil products are starting to be exported, as was the case this year, due to a reduction in payments under the mechanism designed to encourage oil companies to have interest in leaving oil products on the domestic market. 50% of diesel produced in Russia isexported. The volumes are there. We just need to findstimuli for oil companies to leave the fuel for the domestic market and sell it at reasonable prices. It is more due to the regulation of the market and the payment formula for the damper mechanism, etc.

Ultimately, Russia is not interested solely in some kind of tolling scheme for supplying oil to Baku refineries and receiving oil products. This would be more luring if it was within larger projects that involved constructing some large oil pipeline to the Persian Gulf coasts through Azerbaijan and Iran. This would make oil product exchange with Baku expedient for Russia. Currently, such a tolling scheme would create more problems than solve existing ones. Thus, the parties are still discussing this project without getting to actual work’, the expert concludes.

Samir Veliyev

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