Black Sea Nations Wary Of Russia's Big Oil Plans

Valery Timoshenko stands on a beach strewn with household rubbish, medical waste, and tar and points to the grassy hill behind him with disgust. "We've got very few undeveloped natural spaces in this part of Russia," the angry environmentalist tells reporters under the disapproving gaze of local police. "How can they think of building another oil terminal here?"

Heavily polluted by sewage, oil, and agricultural runoff, the Black Sea has already experienced a near total ecological collapse. Facing dramatic losses in the tourism and fishing industries, the six countries that border the sea (Russia, Georgia, Turkey, Bulgaria, Romania and Ukraine) pledged last year to spend $397 million to try to clean it up.

But the fledgling Russian environmental lobby is little match for the Russian energy industry, whose access to Central Asian oil and gas reserves may keep the world economy tanked up for decades to come if only delivery can be assured. Existing pipelines are strained to the limit and were originally designed to deliver crude oil through Ukraine to Eastern Europe.

In addition, Ukrainian independence deprived Russia of most of its Black Sea ports.

So Russia and a consortium of the world's leading oil companies plan to build an oil terminal on the bluffs behind Mr. Timoshenko, linking supertankers just offshore with the Tengiz oil fields in far-off Kazakstan via a 950-mile pipeline.

"If we don't complete this project, Russia will lose its leadership in oil trade of the Black Sea area," says Victoria Dergachova, local director of the Caspian Pipeline Consortium, an alliance of 10 energy companies. She says, "We want to be a Western-type country and sell oil on the world market. To do this we must build new terminals."

The consortium says it is making major investments to reduce the risk of spills, including satellite-based monitoring systems and a rerouting of the pipeline to avoid sensitive areas. Tankers will be loaded from special offshore buoys, linked to the terminal by an undersea pipeline.

The project will also create hundreds of construction jobs and will generate more than $400 million annually in much-needed tax and dividend revenues for Russia when completed, Ms. Dergachova says. Best of all, she says, it's the foreign oil companies that will invest the $2 billion needed to complete the project. Russia and Kazakstan won't have to contribute any money, instead donating an existing 475-mile stretch of pipeline.

The geostrategic benefits for Russia are greater still. The oil reserves of the Caspian Sea and Central Asia may become to the 21st century what the Persian Gulf has been for the 20th, a fact recognized by major energy companies like US-based Chevron, which invested $10 billion to control Kazakstan's Tengiz field. The new pipeline makes Russia the gatekeeper for the delivery of Tengiz oil to world markets, shoring up its influence in the energy-rich republic.

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