Azerbaijan stops exporting oil to Europe

Jan 08, 2007 01:00 AM

Azerbaijan has stopped exporting oil produced by its state energy company to Europe via a Russian-controlled pipeline, the company said.
The decision came after the oil-rich Caspian Sea nation ended its imports of Russian gas because Moscow was demanding a more than twofold increase in the price this year. Azerbaijan's state oil company SOCAR said the crude would be used domestically instead as fuel for power stations.

Azerbaijan, which has its own substantial gas and oil reserves, imported about 4.5 bn cm of natural gas from Russia in 2006 to cover domestic consumption. But the country refused to meet Russia's demand that it pay $ 235 (EUR 180) per 1,000 cm of gas -- up from $ 110 (EUR 84.50).
Last year, SOCAR exported 1.172 mm tons of oil via the Russian-controlled pipeline running from Baku to the Russian Black Sea port of Novorossiysk. An international consortium led by BP that is developing offshore oilfields in Azerbaijan will continue to use the Baku-Novorossiysk pipeline in addition to a new US-backed pipeline running from Azerbaijan to Ceyhan, Turkey, known as the BTC.

In a related development, the government sharply raised the domestic prices for gas at the pump, electricity, water and natural gas for industrial use. Electricity charges went up threefold, water 1.8 times and gas prices at the pump by 50 %, the Economic Development Ministry said.
Russia demanded a nearly identical increase in natural gas prices for Georgia. Unlike Azerbaijan, Georgia has no energy resources of its own and accepted the price increase -- though reduced its level of Russian gas imports.

Both Azerbaijan and Georgia have developed close ties with the United States, and some observers see the sharp price increase as punishment.
But Russian officials say they are trying to put their gas sales on a market basis and eliminate the subsidies they have provided former Soviet republics for years.

Source / Associated Press
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