• 2 hours Oil Nears $52 With Record OPEC Deal Compliance
  • 5 hours Saudi Aramco CEO Affirms IPO On Track For H2 2018
  • 7 hours Canadia Ltd. Returns To Sudan For First Time Since Oil Price Crash
  • 8 hours Syrian Rebel Group Takes Over Oil Field From IS
  • 3 days PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 3 days Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 3 days Syrian Rebels Relinquish Control Of Major Gas Field
  • 3 days Schlumberger Warns Of Moderating Investment In North America
  • 3 days Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 3 days Energy Regulators Look To Guard Grid From Cyberattacks
  • 3 days Mexico Says OPEC Has Not Approached It For Deal Extension
  • 3 days New Video Game Targets Oil Infrastructure
  • 3 days Shell Restarts Bonny Light Exports
  • 3 days Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 4 days Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 4 days British Utility Companies Brace For Major Reforms
  • 4 days Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 4 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 4 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 4 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 4 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 4 days Rosneft Signs $400M Deal With Kurdistan
  • 4 days Kinder Morgan Warns About Trans Mountain Delays
  • 5 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 5 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 5 days Russia, Saudis Team Up To Boost Fracking Tech
  • 5 days Conflicting News Spurs Doubt On Aramco IPO
  • 5 days Exxon Starts Production At New Refinery In Texas
  • 5 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 6 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 6 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 6 days China To Take 5% Of Rosneft’s Output In New Deal
  • 6 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 6 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 6 days VW Fails To Secure Critical Commodity For EVs
  • 6 days Enbridge Pipeline Expansion Finally Approved
  • 6 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 6 days OPEC Oil Deal Compliance Falls To 86%
  • 7 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 7 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
Alt Text

New Iran Sanctions Could Send Oil Prices Higher

Fresh sanctions on Iran could…

Alt Text

Are Oil Markets Becoming Immune To Geopolitical Risk?

The geopolitical risk premium in…

Alt Text

Is Iraq On The Brink Of Civil War?

Kurdistan has dominated Middle Eastern…

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…

More Info

Suitably Pacified, Rosneft to Invest in Chechen Oil Infrastructure

Suitably Pacified, Rosneft to Invest in Chechen Oil Infrastructure

Foreign energy companies will be intrigued to learn that Russia’s turbulent Caucasian republic of Chechnya is now open for investment in its hydrocarbon industry.

Chechnya’s troubled relationship with Moscow began after Iran transferred Chechnya to the Russian empire under the Treaty of Gulistan following the 1804-1813 Russo-Persian War. An extensive guerrilla campaign followed, which lasted until Imam Shamil surrendered to the Russians in 1859.

Chechnya’s experience under Russian domination in the 20th century was not much better. On 23 February 1944, Stalin ordered Chechnya’s population deported en masse to Soviet Central Asia on suspicions of them being traitors and working with the Nazis, with up to one-third of the population perishing along the way. The deportees were only allowed to return home three years after the death of Stalin in 1953, with the Chechen republic being re-established in 1957.

Following the collapse of the USSR in December 1991 restive Chechnya subsequently fought two bitter wars against Russian domination, the first from 1994 to 1996, and the second from October 1999 until early 2009, with both conflicts marked by violence and atrocities committed on both sides. An estimated 70,000-80,000 Chechens, mostly civilians, died in the conflict and the capital Grozny was effectively destroyed. The war produced an environmental catastrophe as well, leaving an estimated one third of all arable land saturated by oil.

The question remains – why, in 1991, when Moscow freely let the Soviet Union disintegrate, was it so determined to retain Muslim Chechnya?

Related article: Nabucco is Dealt Another Blow as Azeri Gas to Use TAP Pipeline

The answer seems to be – oil.

Oil extraction in Chechnya dates back a century, with production growing in the 1960s to a record of 21 million tons in 1971. The quality of the Chechen oil was such that the atheist Soviet Union exported some of it to the Vatican, where it was used in lamps. After peaking in the 1980s, Chechen production stabilized at 4-5 million tons by the 1990s before its conflict with Moscow exploded.

Even more important for Moscow, control of Chechnya enabled Russia to control the flow of rising volumes of Azeri oil natural resources, as the critical Baku-Novorossiysk pipeline ran through Chechnya provided the sole exit access for post-Soviet Azeri “early oil” to Russia’s Black Sea Novorossiysk port, generating valuable hard currency transit revenues for Moscow.

Fast forward to 2013. Russia’s oil giant Rosneft has announced its intention to invest $132 million into geological surveying in Chechnya over the next year and its local subsidiary Grozneftegaz.

But the cash bonanza is not limited to Rosneft.

Chechnya’s Federal State Unitary Enterprise (FSUE) Chechenneftekhimprom is touting for foreign investment. On its website Chechenneftekhimprom states, “Finance Minister Eli Isayev of the Chechen Republic, in reply to a question about the priorities of fiscal policy in 2012, noted that "the key objective will be to raise the living standards of the Chechen population, the development of its economic potential by attracting investment."

Related article: Why Oil Will Stay Strong for Some Time to Come

In a moment of candor the website continued, “The main challenge remains the Republic’s low investment attractiveness, which in the public mind, especially among Russian and foreign citizens,  who see Chechnya as an extremely dangerous and risky place not only to invest, but even risking one’s life. For example, the largest Russian rating agency ‘Expert’ evaluates the investment risks in the Chechen Republic as extreme, highlighting in particular its financial and criminal risks, and on the website of the Ministry of Economic Development of the Russian Federation our country a few months ago was characterized as unfavorable and dangerous for investment.”

Still, nothing ventured, nothing gained.

Oh, as a minor aside…

On 18 June the Russian Prosecutor General's Office announced that the Supreme Court of Chechnya has handed down guilty verdicts on five terrorists who planned to derail an oil train in Chechnya received sentences ranging from 9 to 16 years in a high security prison camp, telling journalists, "In June 2011, the conspirators, who planned to derail an oil train, made a barrel bomb that they placed under the rails in the Grozny District of the Chechen Republic" before being discovered by security guards.

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

Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News