Russia closes the Baku-Novorossiysk pipeline

Russia and Azerbaijan will terminate the agreement on the transit of Azeri oil  via Russia through  the Baku-Novorossiysk pipeline, which operated from 1996.

Corresponding decree was signed on May  5 by  the Prime Minister, Dmitry Medvedev,  according to the "Prime" agency.

The Foreign Ministry is to notify Azerbaijan "on the termination of the contract," signed on  January 18, 1996, which provides for transportation of five million tons of Azerbaijani oil per year at the rate of 15.67 per ton.

According to Igor Demin, the adviser of the president of  "Transneft",  the contract  fixed  the volume and tariffs which have not changed over the years. However, Azerbaijan has failed to fulfill its obligations in terms of the volumes of transportation. In reality,  about 2 million tons of oil were transported. Demin said that the termination of the contract will allow to begin negotiations on the new tariff for the next year.

 In August 2011  "Transneft" initiated a revision of the terms of an intergovernmental agreement with Azerbaijan: Baku  was offered to reduce pumping oil by 30-40% - up to 3-3.5 million tons. The draft amendment to the contract was sent for approval to Baku, but the support is not found. Then the "Transneft" wanted to convey unclaimed  quotas  to LUKOIL, which in 2010  began  the production at the field named after  Korchagin in the shelf  of the Caspian Sea. Direct losses of "Transneft" on the content pipeline, standing half empty and working at the limit of profitability, estimated at $ 50 million per year.

In 2011 Azerbaijan proposed the "Transneft" to transport  oil of the third countries through the Baku-Novorossiysk pipeline. However, Russia disagreed.

* The Baku-Novorossiysk pipeline  has been operating  since 25 October, 1997. -0-