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John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

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Extremism, Militancy and Oil in Dagestan

While Russia’s troubled province of Chechnya for the past two decades has garnered the lion’s share of coverage for its militants’ operations against security forces, neighboring Dagestan is also a hotbed of violence, with shootings, bombings and murders a nearly daily occurrence.

In late January 2013 Russian President Vladimir Putin signed a decree appointing Ramazan Abdulatipov acting head of Dagestan, Russia’s most multiethnic republic, and on 8 September 2013 he was elected president of the republic, with 86 of 88 of Dagestani parliamentary deputies voting for his candidacy. Abdulatipov proposed geological studies on the Caspian Shelf and ordered development of a geological plan for the process fast. Now Abdulatipov has announced that a national oil company will be founded in Dagestan.

To say that Abdulatipov will face an uphill struggle is an understatement. In late December 2013 Abdulatipov candidly addressed the problems facing the region’s hydrocarbon sector, commenting about an earlier meeting with Prime Minister Dmitry Medvedev, “We discussed the development of the energy complex in the Northern Caucasus. I said in my speech that, unfortunately, we reduce everything to outstanding debts. And this is a complex problem. In particular, I said: ‘why in the last 20 years did the oil production in Dagestan decrease by a factor of 10? You should either let us do this or let us develop together.’ Secondly - why do we buy gas from Azerbaijan or somewhere else when we have about 800 billion gas reserves? So it is necessary to mine this gas. I met with Tokarev (Nikolai Tokarev - Chairman of the Board of Transneft, Russia’s pipeline monopoly.). We agreed to prepare and sign an agreement so that Transneft could continue to work without local illegal taps to their pipes siphoning oil. They gave us figures showing that more than 100,000 tons of oil was looted this year. We must fight against this together."

Related article: Iran, Russia Ruffle US Feathers with Oil Swap Deal

Rosneft is already operating in Dagestan via its two subsidiaries, Dagneft and Dagneftegaz. Dagneft was set up in 1994 on the basis of the Dagneft industrial association, which was developing oil and gas fields in Dagestan. In 2004, Dagneft was split into two subsidiaries: Dagneft, which is primarily engaged in oil production, and the gas-producing Dagneftegaz. Dagneft and Dagneftegaz are currently trying to develop more than 40 fields, the largest being the Dimitrovskoye oil and gas condensate field and the Ozyornoye oil field.

Dagestan is also a transit point for Russian Caspian oil. In 2010 launched production of itsYuri Korchagin field, the country's first offshore field in the Caspian. Korchagin has become one of the most profitable upstream projects in the Caspian after Russia reduced export duties on its output. Crude output goes to Dagestan’s Makhachkala port to be shipped to the Black Sea port of Novorossiysk via pipeline. Last but not least, Dagneft also operates a small refinery in Makhachkala.

The wild card in Abdulatipov’s expansive hydrocarbon vision is rising militancy, some of it brought about by his own actions. After Putin replaced Dagestan’s president, Abdulatipov, backed a wave of repression against Dagestan’s substantial Salafist community, with security forces invading villages and arresting large numbers of Salafis in cafes, madrasas, and their homes while intimidating moderate Salafi leaders, civic organizations, and businesses. Abdulatipov also closed the commission for rehabilitation of former guerrilla fighters and encouraged the creation of people’s militias, ostensibly to combat extremism. And now the leader of the North Caucasus Islamist insurgency, Doku Umarov, reported dead numerous times, most recently on 17 January, has threatened to disrupt the Olympics and urged militants to use all available means to commit terrorist attacks across Russia. Moscow’s fears are heightened by the grim statistic that in 2013, there were at least 30 terrorist attacks in southern Russia. A 30 December pair of bombings in Volgograd killed dozens; on 15 January Russia's National Anti-terrorism Committee announced that three Russian servicemen and four gunmen were killed in a shootout in Dagestan’s Karlanyurt village, and another five servicemen were wounded.

Bombings, shootings, murders, and 100,000 tons of oil missing annually – it would seem that Abdulatipov has his work cut out for him.

By. John C.K. Daly of Oilprice.com


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