Kadyrov Says Chechnya Will Soon Be Able to Pump and Process Oil on Its Own

Paul Goble

            Staunton, October 29 – There is a famous scene in David Lean’s film, Lawrence of Arabia, in which Lawrence asks the British general in Cairo to provide the Arab revolt with artillery. The general’s political advisor says that if he gives the Arabs artillery, he will in effect have given them independence. In that case, Lord Allenby says, he won’t do it.

            That scene spring to mind after Chechen leader Ramzan Kadyrov told a Grozny press conference yesterday that his North Caucasus republic is acquiring a 100 percent stake in a company that will allow the Chechens to pump, process and sell oil on their own without reference to others (rbc.ru/economics/28/10/2018/5bd4db849a794774f62cdddd?from=main).

                Most of Kadyrov’s power reflects on the armed forces he controls and his willingness to engage in “wet” operations that his good friend Vladimir Putin wants to retain deniability about. But Kadyrov and the republic he heads remain overwhelmingly dependent on Moscow’s subventions because they simply don’t earn enough on their own to stand up to the center.

            At least potentially, the Chechen acquisition of control over an oil company will change that equation, creating new dangers in the region for Moscow because Kadyrov will be able to finance his own government more fully and thus not be constrained by the need for money from Moscow. 

            The RBC news agency reports that Kadyrov has been pursuing the acquisition of Chechenneftekhimprom since at least 2015 when he first broached the idea with Putin. The Kremlin leader supposedly agreed, but the plan went nowhere; and the following year, Kadyrov complained to Putin that the government was getting in the way.

            Talks have been proceeding fitfully since then behind the scenes over ownership of a company that controls approximately 2,000 pieces of land with a total area of 7740 hectares and on which are more than 1100 oil wells, “the majority of which are not in working condition,” RBC says.

            Moscow has not been active in seeking outside investors to restore their operation and develop the oil industry in Chechnya. But Kadyrov said yesterday that with his acquisition of the company as of October 25, that is exactly what he will do. If he is successful, oil production in Chechnya and earnings from it could shoot up.

            Putin reportedly signed off on this deal on September 18, according to the Chechen government.  But it is far from clear whether the Kremlin leader fully understands how Kadyrov might use his new possession and how that will at a minimum tilt the balance of power between Moscow and Grozny in a direction unfavorable to the former.