Wednesday, 20 June 2001

THE IRRESISTABLE FORCE & THE IMMOVABLE OBJECT: RUSSIA, TURKEY, OIL & THE STRAITS

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By John C.K. Daly (6/20/2001 issue of the CACI Analyst)

BACKGROUND: It is the explicit goal of the Russian government to retain as much control and profit as possible from the production and transit of Caspian oil. Energy has become the fiscal engine that drives the Russia government. Moscow intends to have Caspian oil transported in Russian bottoms.

BACKGROUND: It is the explicit goal of the Russian government to retain as much control and profit as possible from the production and transit of Caspian oil. Energy has become the fiscal engine that drives the Russia government. Moscow intends to have Caspian oil transported in Russian bottoms. On 7 March, Chingiz Izmailov of the Russian Transport Ministry stated that the Ministry 'plans to invite large tankers from Russian shipping companies Novoship and Sovkomflot to transport the CPC oil'.

Russia's southern ports account for 70% of the country's overseas trade. During January-October 2000, Novorossiisk handled 1,703 ships. Of these, only 46 were Russian, and another 63 belonged to other CIS nations. Of the 11,200,000 tons of vessels operated by Russian companies, 7,000,000 tons are registered under foreign 'flags of convenience' because of heavy taxation. Novorossiisk is Russia's only deepwater port on the Black Sea; Novorossiisk and Tuapse are the only functioning oil terminals on Russian territory. In 2000, Novorossiisk handled 40,250,000 tons of oil products; and shipped 14,070,000 tons of oil and oil products in January-April, a 17% increase over the previous year. In April alone, 42 tankers were loaded. In anticipation of CPC throughput, the port has undergone a number of improvements; in December Transneft completed its reconstruction of Novorossiisk, adding 7,000,000 tons of additional capacity to the port.

Nearly 50,000 ships a year now transit the Straits. Turkey receives no tolls on this traffic, and, under the terms of the Montreaux Convention, ships are not even required to use pilots.  Turkey has repeatedly stated that it will not allow this number to increase. Adding two Aframax tankers per day in the Straits would produce a .0875% increase in tanker traffic.

IMPLICATIONS: The biggest question on the oil companies’ minds is whether the Turks are bluffing. Potential Turkish reactions to increased tanker traffic could take many forms short of outright banning. If Turkey were to impose new safety restrictions and inspections on tankers passing the Straits, the effects would be immediately felt until new tonnage became available, dramatically raising charter rates for voyages to the Black Sea.

The Turks have increasingly used the United Nations International Maritime Organization to advance their positions on Straits issues. Turkish efforts received a quantum boost in 1999, when Turkey was elected to the IMO Council. Turkey could propose an amendment to the International Convention for the Prevention of Pollution from Ships to designate the Bosporus and Dardanelles as 'Special Areas', maritime regions considered especially vulnerable to pollution, where oil discharge is completely forbidden. After the Galapagos oil spill last January, the World Wildlife Fund’s Mediterranean Program office urged that the IMO designate the Bosporus and Dardanelles a 'Particularly Sensitive Seas Area' (PSSA), an even higher level than “Special Area.” Turkey could also increase inspections as a member of both the Mediterranean and Black Sea MOUs, which coordinate shipping policies among member states on behalf of the IMO. Under the 1999 Black Sea MOU charter, members are required to inspect 15% of the shipping transiting its jurisdiction every year. Turkey could choose to target the entire tanker traffic of the Straits (currently running at about 9% of the waterway’s annual total) and a substantial percentage of Russia’s merchant marine as well. 

In pressing for detailed safety inspections the Turks could cite the example of the Cypriot-flagged single-hulled tanker Castor. While in transit from Rumania to Nigeria with a cargo of unleaded gasoline it developed a twenty-four meter crack in its deck plates. The American Bureau of Shipping subsequently discovered 'hyper-accelerated corrosion' was responsible. The ABS found  'an annual corrosion rate of as much as 1.5mm compared to normal rates of about 0.1mm or less,' a rate fifteen times greater than expected. The Castor’s passage of the Straits and her subsequent emergency provides Turkey with a very persuasive argument for rigorously inspecting all tanker traffic. If the Turks chose to target "flags of convenience" shipping like the Castor, they would have powerful allies; the International Federation of Transport Workers (ITF) has been waging a war against the system for fifty years. About one-fifth of the world’s 83,000 ships fly a flag of convenience, but FOC shipping represent more than half of ship losses worldwide. 

The Turkish government would have broad internal and international public support for such actions; activism on the issue has been building over the years. On 20 April 418 Turkish NGOs signed a joint declaration against tankers which transport hazardous material through Turkish Straits. The issue of the treatment of ballast discharges is another issue that is increasingly preoccupying maritime nations. By imposing strict regulations Turkey could claim to be preserving the biodiversity of the Black Sea, citing as an example the depredations of the jellyfish Mnemiopsis leidy. Brought in ballast water into the Black Sea in the early 1980s, it has overwhelmed indigenous aquatic life; its annual biomass is estimated at 1,000,000,000 tons. Other species suffered; the annual anchovy catch plummeted from 500,000 tons in the early 1980s to a low of 100,000 tons by 1989. In autumn 1999 Mnemiopsis leidy was first sighted in the Caspian along the Kazakh coast

CONCLUSIONS: Both Russian and Kazakh officials have attempted to downplay potential disputes over Bosporus passage. Kazakh Foreign Minister Idrisov has averred that Kazakh oil exports would not disrupt Straits shipping, as the northern flow of commerce through the Straits was 'much more active' than the southward flow of ships. Chevron does not foresee problems either, estimating that CPC would load one tanker every two days at Novorossiisk. According to a Chevron spokesman, even during the peak of the first phase of Tengiz development, the consortium would send 'little more than one tanker a day through the Turkish Straits'. For the Turks, that’s one tanker too many. In the upcoming game of brinkmanship, Turkey clearly has the upper hand. Caspian energy is unlikely to be the Eldorado that foreign charterers hope for. Turkey will most likely selectively target tankers until the Main Export Pipeline committee makes its final choice for a route next spring. In imposing strict inspection and safety regulations, Turkey will have national and international opinion on its side. If Russia insists on 'the letter of the law' in interpreting its passage rights under Montreaux, then the Turks will insist on 'the letter of the law' in interpreting their rights under IMO and MOU regulations. If the Turks do not get a Baku-Ceyhan route, then it seems certain that both the Black Sea and Mediterranean will play host to increasing numbers of idled tankers.

AUTHOR BIO: John C. K. Daly received his Ph.D. in Russian and Middle Eastern Studies from the University of London. This article draws on a substantially larger study of the subject.

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The Central Asia-Caucasus Analyst is a biweekly publication of the Central Asia-Caucasus Institute & Silk Road Studies Program, a Joint Transatlantic Research and Policy Center affiliated with the American Foreign Policy Council, Washington DC., and the Institute for Security and Development Policy, Stockholm. For 15 years, the Analyst has brought cutting edge analysis of the region geared toward a practitioner audience.

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