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Chechnya Courts Azerbaijan after Fallout with Russian Oil Giant

As the license for Russia’s state-own oil giant Rosneft to explore war-torn Chechnya’s hydrocarbon reserves is set to expire, Azerbaijan is invited to consider the contract as Chechen leader Ramzan Kadyrov seeks to increase his bargaining position vis-à-vis Moscow.

On 4 April, Chechen officials announced that Rosneft’s license had expired and an invitation for exploration had been extended to Azerbaijan’s state oil company, SOCAR.

Baku is doing its best to downplay the issue, hoping to avoid the politics behind developments that could see it thrown in the middle of a battle between Russian Deputy Prime Minister Igor Sechin, a Rosneft elite, and Kadyrov.

Kadyrov fell out with Rosneft last year over the Russian oil giant’s failure to build an oil refinery in Chechnya – a massive project that was apparently promised to the Chechen leader in return for his patronage. With that in mind, Kadyrov is also hoping that Azerbaijan will help build the oil refinery.

It remains unclear whether Azerbaijan will take Kadyrov up on the invitation. So far, official Baku is balking at the massive security risks in undertaking exploration in Russia’s North Caucasus. But it is a tempting offer. Chechnya has an estimated 60 million tons of oil and 3 billion cubic meters of natural gas.

Baku, however, should be concerned. Though the link is rarely made between oil and Russia’s problems with the North Caucasus, the natural resource has much to do with the Chechen violence that has spread through Russia in the past several years. And Azerbaijan is not without its links to the Russian-Chechen oil nexus, particularly with the inception in 1999 of the Transneft oil pipeline monopoly, which controlled the Baku-Novorossiisk line. As Oilprice.com senior analyst John Daly wrote in an earlier article, this line was “the sole export route for Azerbaijani ‘early’ oil exports, which crossed 95 miles of Chechen territory.”

Kadyrov himself poses a potential security risk. Though Kadyrov was a creation of recently re-elected President Vladimir Putin, that relationship has since soured and by all appearances, Kadyrov is attempting to loosen the noose that is Moscow’s control.

On a broader level, Azerbaijan will likely prefer to wait things out a bit and to see how Chechen militants will respond to Putin’s return to office. Some predict a renewed outbreak of violence and terrorist attacks in Russia’s major cities.

By Jen Alic of Oilprice.com

Jen Alic is a geopolitical analyst, co-founder of ISA Intel in Sarajevo and Tel Aviv, and the former editor-in-chief of ISN Security Watch in Zurich.

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