"WE ADMIT CONSTRUCTION OF UNDERWATER TRANSCASPIAN PIPELINES WITH COMPROMISE"

Vice Minister of Foreign Affairs, Special representative of the President of the Russian Federation for Caspian sea status affairs V.I.Kalyujniy

Caspian Energy: How do You assess today's practical importance of the Convention on the Caspian ecology signed in Teheran? What kind of steps will be taken in future for its realization?

Vice Minister of Foreign Affairs, special representative of the President of the Russian Federation on Caspian sea status regulation: We are satisfied with the Frame Convention on environmental protection of the Caspian sea signed in November 2003 in Teheran. This is the first document signed by all the five Caspian countries. The nearest task is for the Convention participants to complete the intergovernmental procedures needed for its entering into force. During a year after this the Conference of the Sides will be held where financial and organizational issues of the Convention must be solved. As the signed document is of a frame character determining basic directions and principles of activity, it must be of a fully concrete content, the appropriate protocols and agreements in the field of environmental protection must be signed.

Is it possibie, in Your opinion that Iran and Turkmenistan will achieve a compromise?

There is a possibility. We expect the compromise will be achieved. From our side we are ready to support the ongoing negotiations, surely, if the agreeing sides ask for this.

How do You assess the results of Your last meeting with the Turkmenistan leader Saparmurat Niyazov?

We highly appreciate the meeting with the President of Turkmenistan S.A.Niyazov. A fully useful and substantial conversation took place, key problems of the Caspian legal status was discussed. We received quite clear, and what is more, giving hope for moving ahead answers to all the questions.

What kind of possibility is there for signing bilateral agreement with Turkmenistan similar to those with Kazakhstan and Azerbaijan?

Russia has no bottom sites in the Caspian adjoining with Turkmenistan. Turkmenistan conducts bilateral dialogue with its neighbors - the agreement with Kazakhstan is almost prepared, negotiations with Azerbaijan are renewed, next stage of negotiations with Iran is expected in the nearest time. We welcome this process, wish it success and progress.

Today Azerbaijan and Kazakhstan speak about joint laying of the Transcaspian gas line, may the KazRosGaz JV join it or does this idea belong to the category of fantasy?

Before the project of creating Turkmenistan-Azerbaijan Transcaspian gas line was proposed, but today, as far as I know, this question is not standing at the practical level. I have no information about the plans of Kazakhstan-Azerbaijan gas line yet. In our opinion, in view of high seismic character of the Caspian, employment of the main lines is linked with a high ecological risk. And in view of the closed character of the reservoir and directions of the flows, in case of an accident independent of the pipeline route, all will suffer a damage including the coastal countries and the reservoir in the whole. Therefore Russia considers it undesirable to construct subsea main lines. In view of a compromise, we admit their construction with the condition that ecological expertise of these projects will be approved by all the Caspian countries. And in case of an accident the side having laid it will bear a material liability for the harm caused to the other sides and environment.

How do You assess the situation in Batumi, to what extent, in Your opinion, such kind of economic sanctions in regard to anybody infringing the population's interests and the third sides may be justified today?

This is quite another problem. Our position on regulation there is known.

What kind of possibility is there today for creation of the KazRosneft JV by the proposal of the Kazakhstan president during the visit of the Russian president to Astana?

KazRosGaz has been created, but I have not heard about creation of KazRosneft yet. In pursuance of the Russian-Kazakhstan Agreement on demarcation of the north part of the Caspian sea aimed at realization of sovereign rights of the depth users and the Protocol to it, the plans of joint development of Kurmangazi, Khvalinskoye and Central oil and gas bearing structures are being coordinated. The Protocol stipulates creation of a JV in Kurmangazi. Creation of JV also in the rest two structures in possible, too.

Realization of which direction - Novorossisk-Supsa-Ceyhan or Novorossisk-Baku-Tbilisi-Ceyhan in future is most real in Your opinion? May the Azerbaijan OR load Russian oil in exchange for SWAP in Ceyhan or Supsa? Could You stop in detail on this question.

Currently the Baku-Novorossisk pipeline is operating. It has 5,000,000 tons of oil per year capacity with the possibility of increase till 18,000,000 tons. Baku-Tbilisi-Ceyhan oil line is being constructed in another direction. I do not quite understand why the first oil line must suddenly work in a reverse mode and become a part of the second one. The problem of OR underloading exists not only in Azerbaijan, but also in our country, in Russia. We would probably better think about loading our own OR first of all.

How in Your opinion will the economic policy of the Russian government in the Caspian change, or will change at all after the appointment of Michael Fradkov as the new Prime Minister of the RF?

Caspian policy of Russia is mainly determined. The task of increasing effectiveness of its realization is standing before the new Russian government.

How the CPC problem must be solved and who in Your opinion must solve it "so as the wolves were fat and the sheep were safe"?

First of all I would like to specify whom You consider "the wolves" and whom "the sheep". I would not divide the interested sides into the herbivorous and the carnivorous. If to speak seriously, CPC really has got problems. The situation can be hardly named normal, while CPC debts almost twice exceed cost of the very project, and taxes to the federal and regional budgets of Russia have not been paid. The problem must be solved on the bases of creating a cumulative fund necessary to expand the system's throughput capacity.

However, not everybody is interested in it, some propose to provide financing through new borrowings. I think the problem must be solved with the balance of interests of all the sides participating in the project.

How do You assess the level of investment maintenance of the Caspian projects with participation of Russia and the realization rate of these projects?

We proceed from that the questions of investment maintenance must be solved on the bases of economic attractiveness of this or that project. No politicization must be admitted here, investors must determine the degree of their interest and adopt decisions by themselves. It concerns both the Russian and foreign companies.