THERE IS MORE HOPE TODAY FOR SOLUTION TO CASPIAN PROBLEM THAN SIX MONTHS AGO -

Vassili Istratov, Ambassador Extraordinary and Plenipotentiary of the RF to the Republic of Azerbaijan

 

Caspian Energy (CE): Mr. Istratov, what could you say about present mutual relations between Azerbaijan and Russia? Which sectors of mutual cooperation are the matters of top priority?

Vassili Istratov, the Ambassador Extraordinary and Plenipotentiary of the Russian Federation to the Republic of Azerbaijan: Evaluating the state of mutual relations between Russia and Azerbaijan, I would have to cite Presidents of Azerbaijan and Russia Ilham Aliyev and Vladimir Putin repeatedly saying our relations today are very positive and experiencing a sustainable growth. Presidents of Azerbaijan and Russia said there were no serious problems in the relations between the two countries because our countries are neighbors, close to each other, and we have much in common and try to build our relations on a good neighborhood basis.

In terms of the top priority spheres of cooperation between the countries, I deliberately steer clear of such an answer: we do not need to advance in one predetermined direction and all sectors of cooperation are vital. We actively cooperate in politics, economics, and humanitarian sectors and each field contains considerable reserves. Considering specifics of the Caspian Energy Journal, I can say one of the important cooperation fields is economic ties that could have progress faster, I believe.

 

CE: In your opinion, what is preventing their development?

Vassili Istratov: Today the government as such is laying only a certain framework to develop economic ties. We set no comparative parameters for mutual trade, so, for example, nobody demands grain or woodwork production be delivered in a certain quantity from Russia to Azerbaijan; moreover, we have neither the State Planning Committee nor the Ministry of Foreign Economic Relations to plan and monitor all this. The trade between our countries is progressing to a great degree independently and over the last years it kept growing up. The simplest example: starting this year our mutual turnover lacks one component, gas, which made up 30% of our total export to Azerbaijan in 2006. Despite this missing 30%, the turnover is equal, even slightly higher, than that of 2006. This means that the loss in mutual trade has been compensated for.

Particularly, agricultural production is a significant column in Azerbaijan's export to Russia. That is understood in view of local vegetable-growing and earlier harvest compared to Russia's regions. But it is not the only field we are building our ties upon. What Russia sells to Azerbaijan is chiefly machines, equipment and machinery-building production as whole.

Back to the essence of your question, I would say we do not have any serious problems but the cross-border issues that are widespread in other regions as well. However, these issues I regularly face in my capacity of Ambassador are drawing quite unfavorable background for mutual relations. Certainly, in some cases the goods cannot cross the border so easily. Some problems, I hope, can be solved through construction of new checkpoints to eliminate overloading.

 

CE: Recently, President of Russia Vladimir Putin has established a State Commission to prepare for the Olympic Games in Sochi. In view of geographic closeness of two countries, are you planning to involve Azerbaijani capital or relevant companies?

Vassili Istratov: That would be a good idea and I would support such process. The main question is that we still do not have any certain decision. But it is not a secret that many will be wishing to participate in this process. It is well known that in the nearest outlook Azerbaijan must get a chance to become one of the investors in this region of the RF. Moreover, Azerbaijan got her own plans regarding the Olympic Games and her participation in the projects of the kind would be undoubtedly interesting.

I have already met Azerbaijani officials handling Azerbaijan's application for the Summer Olympic Games in 2016; we are eager to provide them our full support proceeding from our experience, though not necessarily positive, like our repeated failing to present Russia as a host for the Olympic Games. However, those failures have constituted the success. Our experience was not limited to running our candidate for the Olympic Games and winning at once. Unfortunately, this happens neither in economy nor in sports. But I think we have some perspectives in this respect and we shall develop them; Azerbaijan must be the first to display her initiatives for Sochi or Moscow authorities would not go across the world asking ‘would you mind to help us?.' The offers should come from Baku and be quite specific, something like we-are-ready-to-do-this-and-this.

 

CE: Azerbaijan can participate in terms of energy, there is such project as an energy exchange...

Vassili Istratov: In fact this is an existing region-banding project and people in RAO UES of Russia told me it is already underway. But there are still some unsolved questions here, as against the situation in technology respect.

 

CE: How would you evaluate the potential of energy cooperation as a whole? What are the opportunities arising with the startup of gas production at Shah Deniz?

Vassili Istratov: LUKOIL of Russia holds 10% stake in Shah Deniz Consortium. The main question is that the very company was staking in other projects. It has sold its stake in Azeri-Chirag-Guneshli so far, but this is its own decision.

 

CE: What about Kapaz field, where Russian companies used to partake?

Vassili Istratov: As far as I know, Kapaz is a disputed field and Russian companies will not be partaking in the project at all until the two countries decide who the field will be belonging to.

In Russia, even the companies with control stock held by the government are making their decisions in terms of economic feasibility. So, in case there are real free resources for sale in Azerbaijan, we will certainly be interested. No new projects, no new participation. 

 

CE: So do you think there are no attractive oil&gas projects in Azerbaijan?

Vassili Istratov: There are, but without any free space in. All projects are different in terms of attractiveness. I think through the depletion of resources within Russia and other regions the said projects will get more and more attractive, it is clearly understood.

In terms of energy cooperation, I would say it has always been real for our countries. It is enough to mention the USSR's oil industry having started namely from Azerbaijan, wherefrom the relevant experience passed to Russia, resulting in ‘second Baku', ‘third Baku' and so. Qualified personnel and technology also came from Baku, and it will never be forgotten.

Our countries are often spoken of as energy rivals, but it is generally not so. Our countries really can collaborate and the rivalry is but a fact, just a speculation. Speaking of Shah Deniz Project, as I said above, there is Russian participation in this project and it is intended to be continued. In terms of how we can further collaborate under Shah Deniz Project, it is still early to say. One should wait the field to start producing really big amounts of export gas and only then speak of deliveries, including those to Russia.  Theoretically it is possible, though not a matter of tomorrow or a distant future. Moreover, there is an existing operating gas pipeline connecting Azerbaijan and Russia.

 

CE: Is it a fact that Russia is ready to purchase Azerbaijani gas at world prices?

Vassili Istratov: Each billion of cubic meters of gas counts in the world today. All depends on economic situation in each individual case. Gazprom earlier showed its interest in reconstruction and temporary use of Azerbaijan's gasholders. This is a quite possible project, but, still, everything is up to economic interests of Azerbaijan and Russia.

 

CE: How will the unresolved legal status of the Caspian Sea (in five-side format) affect the Russian Caspian Energy Strategy?

Vassili Istratov: It has already been the second decade we are solving the problem of legal status of the Caspian Sea, and still we hope for the soonest breakthrough. There is more hope today for solution of Caspian problem than, say, six months ago.

I do not deny that no final decision on the legal status of the Caspian Sea is a factor for solving any problems covering economic activities in the Caspian, but I  assume that political issues can be resolved much faster than the problems not existing today in energy relations between Azerbaijan and Russia, including Trans-Caspian projects. So if we talk of Trans-Caspian projects, we mean the years 2012-2015. And we hope to settle the Caspian Sea status issue much sooner.

 

CE: What is your attitude towards probable implementation of Trans-Caspian projects?

Vassili Istratov: Nobody will join a project for political reasons. Today's major concern is ensuring a resource base of supplies, their commercial attractiveness. The project must leave the theoretical realm of discussions. Finally, I think Kazakhstan and Turkmenistan, the owners of energy resources, will determine directions of energy flows. 

 

CE: Mr. Istratov, at the USSR times neighbouring republics applied the principle of complementarity between enterprises to building up the industrial area. Has this potential been exhausted in the relations between Azerbaijan and Russia?

Vassili Istratov: In some regions of Russia the industrial sector remained unchanged, while in others it underwent fundamental changes as some branches ousted the others. However, there is one more concern to be taken into account - overloaded capacities in Russia and the full dealing portfolio. The representatives from the Ural plants have recently visited Baku. Their dealing portfolios are filled rapidly, so the plants cannot fit into the terms of these projects' implementation. The Ural region consumes more energy than in 1987, the peak consumption year. It means the industry is operating at full load and, thus. new orders might result in problems with terms of fulfillment.

 

CE: What is the North South Project for Russia?

Vassili Istratov:  The wide circle of countries, both inside and outside of the region, is interested in the project as it is economically expedient, politically profitable and opens up marvelous perspectives. However, there are concerns related to neither Azerbaijan nor Russia, which drag the project's implementation. Let us hope they will be settled in the near future.

 

CE: What will be the follow-up steps in this route's implementation?

Vassili Istratov: At first we have to repair the railroad. I many times heard the responsible representatives of Azerbaijan saying "we are ready". I have no grounds to cast doubts on their words.

 

CE: What about a seaway ...

Vassili Istratov:  The seaway is currently in operation, which, however, could have been much better. It is much easier to deal with the railroad as it already exists. The most important thing is the readiness of Russian Railways to extend real promotion to the route's repair.

 

CE: How would you evaluate the work of the Azerbaijan-Russian Intergovernmental Economic Commission?

Vassili Istratov:  I think the timeout in the commission's work has been taking too long. Soon we are going to surpass a record on dragging the commission's work. Partially this is explained by staff changes first in Azerbaijan, then in Russia.

But now, following the successful visit of Russian Co-Chair Sergey Naryshkin to Baku, we are positive tо have the next 11th meeting of the Intergovernmental Commission in Moscow until the yearend 2007.

Thank you for the interview