Russia Squeezes CPC For Unpaid Taxes
Russia Squeezes CPC For Unpaid Taxes
As Russia calls for the Caspian Pipeline Consortium to compensate it for unpaid taxes and fines, NBCentralAsia experts say that it may be pushed into bankruptcy, damaging Russian-Kazak relations.
The Russian government has assessed the Caspian Pipeline Consortium, saying that it owes 290 million US dollars in unpaid taxes and fines from between 2004 and 2005, according to Kommersant newspaper on July 13.
The CPC supplies oil from the Tengiz oilfield in Kazakstan to Novorossiysk on the Black Sea through the only private oil pipeline in Russia.
Its total estimated debt is 5.5 billion dollars and major shareholders Transneft, Kazmunaigaz, Chevron, Sultanate Oman, LUKARCO, ExxonMobil and Rosneft all stand to lose out.
There’s been a standoff between the CPC and the Russian government for the past 11 years. CPC shareholders want to increase throughput from 23 to 67 million tonnes of oil a year, but Russia has dug its heels saying that the plan works against its financial interests.
Russia is insisting that the CPC service its debt by paying higher oil transportation tariffs. The cost of transporting one tonne of oil will jump from 24 to 38 dollars.
The CPC is all set to renegotiate its terms for repayment during the next shareholders meeting in August or September. The Russian pipeline monopoly Transneft, which has a 24 per cent share in CPC, is expected to suggest that the debt be restructured by issuing European bonds and raising the pipeline’s own rates.
Analysts say that the consortium may be facing bankruptcy, and Kazakstan’s Kazmunaigaz, which owns a 19 per cent share in CPC, and US-based Chevron, which owns 15 per cent, both stand to incur heavy financial losses.
NBCentralAsia analyst Maksim Kaznacheev explains that while Russia will no doubt be delighted at the opportunity to gain control over the only private pipeline on its territory, “CPC’s bankruptcy could inadvertently damage Russian-Kazak relations”.
“[The CPC does not profit Russia] and so the political elite has decided to use this situation to get a controlling share package in the pipeline,” said Kaznacheev.
However, Askar Nursha, an expert in foreign policy studies at the Kazak Institute for Strategic Research, does not believe that the CPC will go bust.
“What is happening is that sanctions have been imposed on CPC to make other shareholders more compliant,” she said.
The CPC could get around Russia’s high tariffs by redirecting Kazak oil from Tengiz to alternative routes. However, some experts doubt that Tengiz oil could be redirected to pipelines like Baku-Tbilisi-Ceyhan or Atasu-Alashankou due to the lack of infrastructure.
“Oil would have to be supplied to Baku by tankers, but the companies that operate at Tengiz don’t have enough of them and transporting oil by rail is, as a rule, more expensive than transporting it through pipelines,” said Kaznacheev.
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
The Russian government has assessed the Caspian Pipeline Consortium, saying that it owes 290 million US dollars in unpaid taxes and fines from between 2004 and 2005, according to Kommersant newspaper on July 13.
The CPC supplies oil from the Tengiz oilfield in Kazakstan to Novorossiysk on the Black Sea through the only private oil pipeline in Russia.
Its total estimated debt is 5.5 billion dollars and major shareholders Transneft, Kazmunaigaz, Chevron, Sultanate Oman, LUKARCO, ExxonMobil and Rosneft all stand to lose out.
There’s been a standoff between the CPC and the Russian government for the past 11 years. CPC shareholders want to increase throughput from 23 to 67 million tonnes of oil a year, but Russia has dug its heels saying that the plan works against its financial interests.
Russia is insisting that the CPC service its debt by paying higher oil transportation tariffs. The cost of transporting one tonne of oil will jump from 24 to 38 dollars.
The CPC is all set to renegotiate its terms for repayment during the next shareholders meeting in August or September. The Russian pipeline monopoly Transneft, which has a 24 per cent share in CPC, is expected to suggest that the debt be restructured by issuing European bonds and raising the pipeline’s own rates.
Analysts say that the consortium may be facing bankruptcy, and Kazakstan’s Kazmunaigaz, which owns a 19 per cent share in CPC, and US-based Chevron, which owns 15 per cent, both stand to incur heavy financial losses.
NBCentralAsia analyst Maksim Kaznacheev explains that while Russia will no doubt be delighted at the opportunity to gain control over the only private pipeline on its territory, “CPC’s bankruptcy could inadvertently damage Russian-Kazak relations”.
“[The CPC does not profit Russia] and so the political elite has decided to use this situation to get a controlling share package in the pipeline,” said Kaznacheev.
However, Askar Nursha, an expert in foreign policy studies at the Kazak Institute for Strategic Research, does not believe that the CPC will go bust.
“What is happening is that sanctions have been imposed on CPC to make other shareholders more compliant,” she said.
The CPC could get around Russia’s high tariffs by redirecting Kazak oil from Tengiz to alternative routes. However, some experts doubt that Tengiz oil could be redirected to pipelines like Baku-Tbilisi-Ceyhan or Atasu-Alashankou due to the lack of infrastructure.
“Oil would have to be supplied to Baku by tankers, but the companies that operate at Tengiz don’t have enough of them and transporting oil by rail is, as a rule, more expensive than transporting it through pipelines,” said Kaznacheev.
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
