Chechnya's Victor to Face Russian Grip on Oil Riches

The next battle Moscow will fight to keep the tiny republic of Chechnya within its borders will not be fought with rocket-propelled grenade launchers.

The next battle will be fought over rebuilding the Chechen economy, and it will be fought with oil.

Well over two-thirds of Chechen voters, who swarmed to the polls Monday, elected Aslan Maskhadov as Chechnya's president. The vote was a further step in Chechnya's political independence from Moscow.

Mr. Maskhadov says his primary goal now is to win recognition of Chechnya's independence from other nations, including Russia. But it was also a vote for stability and moderation, since Maskhadov was the most moderate candidate in the race and the one Russia is most comfortable negotiating with.

The political independence of Chechnya is a practical fact, in that the last Russian troops have been withdrawn, and Russian police, prosecutors, and tax collectors are not operating on Chechen territory - as they are in every other Russian territory and republic.

But economic independence is another matter. The key to building a legitimate economy in the separatist republic is through a revival of its once-thriving oil industry. For that, says Sergei Markov, an analyst at the Carnegie Center in Moscow, "it is almost impossible to be independent. They need Russia to develop it."

Chechnya still uses the Russian ruble as its currency, is part of the Russian grid of gas and electricity, and its businessmen are still deal primarily with Russia, Mr. Markov says. "From an economic point of view, Chechnya doesn't want to be independent," he adds.

Most of all, Chechnya wants to be part of the coming oil bonanza in the Caspian Sea region. The first oil will begin to flow from wells in the southern Caspian in about three years. How that oil will be carried to market means tens of millions of dollars to the countries the pipelines cross.

Last week, in one of Zelimkhan Yandarbiyev's last moves as acting president of Chechnya, he proposed a $3 billion network of pipelines that would cross Chechen territory. He has been putting together private financing for the project.

A major existing pipeline from the Caspian port of Baku, Azerbaijan, to the Black Sea port of Novorossisk, Russia, goes through Chechnya. This pipeline was shut down during Chechnya's war against Russia and is now used only for small-time pirate operations.

Any oil that crosses Chechnya is going to cross other parts of Russia as well and would require mutual cooperation. On the other hand, it is possible for Russia to cut Chechnya out of the oil-transport picture.

One Russian official privately confirmed that a Russian oil-transport company, Transneft, has drafted contingency plans for rerouting pipelines around Chechnya, although Transneft officials deny it.

Chechnya was once one of the most important centers of oil production and refining in the Soviet Union. At their peak in the late 1960s, Chechen wells produced 5 million tons of oil per year, and Chechen refineries had over 20 million tons of capacity - most of which refined oil from Siberia.

By the time the late Chechen President Dzhokhar Dudayev declared independence from Russia in 1991, Chechen wells were running down, producing only 1 or 2 million tons per year. And the Chechen economy was becoming increasingly criminalized.

"An essential part of the oil just disappeared during the Dudayev years," says Alexander Arbatov, chairman of the committee for natural resources of the Russian Academy of Sciences. "In the early '90s, 15 million tons of crude came from western Siberia and only 10 million tons went back. Obviously, there was an illegal deal between suppliers and the Chechens for export of the missing oil."

After the war started at the end of 1994, the Chechen oil industry came to a halt altogether. Some wells illegally pump oil into the pipeline, and the oil equivalent of moonshiners tapped the pipe and set up backyard refining operations. Since the fighting stopped last August, the Chechen authorities have been trying to stop these pirate operations so they can restore credibility to their oil infrastructure with outside investors and governments.

The hard-headed practicality of Chechnya's economic future was probably brought home to Chechen leaders by Boris Berezovsky, appointed to the Russian Security Council this fall and put in charge of the restoration of Chechnya's economy. Mr. Berezovsky is a major shareholder in Sibneft, an oil company that was a significant player in Chechnya's old oil economy.

Chechnya has another economic choice, Markov notes. "Chechnya can become some sort of pirate republic," he says, "which means that its major profit is coming from criminal activities." If so, he adds, "then Chechnya has no need for relations with Russia."

Russian railway engineers have already begun work on a 50-mile detour that will skirt Chechnya on the north-south rail route through the Caucasus. The new route will be a little more direct, but mainly it will be more secure. Two trains were robbed this month alone as they crossed Chechnya, and several people were killed in one holdup.