Chechnya — Who Holds the Key?

Oil field

Are the names Vladimir Putin and Alu Alkhanov the fundamental names in the quest for a stable Chechnya? Perhaps it is Aslan Maskhadov and Shamil Basayev, seekers of an independent Chechnya. But power also lies in the hands of David O’Reilly, John Browne and Lee R. Raymond, CEOs and chairmen from ChevronTexaco, BP, and ExxonMobil.

Big Business

Oil is the crux of the power struggle in Chechnya — not just in the pure crude supply form, but in its transportation and export. Chechnya is not only crucial to the world as an oil source, but as a prime location for transferring oil from the Caspian Sea to the Black Sea and, from there, to the West. Whoever controls the territory controls this flow of oil and thus makes the money. By staying in Chechnya, Russia is directly influencing this movement of oil and profiting handsomely.

Russia’s oil boom started in 1999 and dramatically increased after the Sept. 11 terrorist attacks due to instability in the Middle East, and American, European, Japanese and Chinese needs for alternative oil sources. American and British oil companies began investing heavily in Russian companies (for example, the BP acquisition of 50% of the Russian company TNK in 2002, forming TNK-BP).

However, the Russian oil market is often not economically safe for long-term investments by foreign companies. There are many obstacles to foreign investment, such as denial of tax breaks, the fact that foreign investors are not protected in any way from the losses associated with such an industry, and the often-questionable arrest and detainment of main players within the Russian oil companies.

The worst scenario for Western and independent Russian oil companies is if Russia nationalizes all natural resources, thereby ensuring all extracting companies become subcontractors of the government. The Russian government would be in control, and the current free-market system for Russian oil would collapse. This scenario would have direct financial implications for TNK-BP and YukosSibneft (both independent of government control) and the investments in these two companies from ChevronTexaco, ExxonMobil and BP funds would be worthless, likely undermining stock prices worldwide.

As a result, it is crucial for many Western oil companies that Russia does not have a complete hold over Chechnya and its incumbent oil wealth.

There is a school of thought that suggests the West wants to keep Russia in tow and prevent it from growing to be a formidable nation again by cutting off its biggest economic catalyst, crude oil. This strategy obviously prolongs the Chechen conflict because the majority of the funding for previous anti-Russian campaigns has come from major Western companies. UNICAL, for example, sponsored the Taliban in Afghanistan against Russian forces. BP and Exxon funded the former Soviet republics of Azerbaijan, Uzbekistan and Kazakhstan in an attempt to eliminate Russian influence. During the 1994-96 Russian-Chechen war, many of the mercenaries fighting against the Russians were in fact hired by big Western businesses. These examples are classic cases of military might against corporate money.

British and American influence is prominent with most exiled oligarchs and leaders. Such is the case with the prominent oil tycoon, Boris Berezhovsky (who is believed to have ties with Chechen Islamic terrorists), being given asylum in said countries.

The thought is that if Chechnya can be cut off from Russia, it will severely damper Russia’s ability to export oil, as the majority of the pipelines run through Chechnya. But giving independence to Chechnya will create major problems for Russia as many other Muslim majority states, namely Dagestan and Tartarstan (that supplies Russia with approximately 25 percent of its crude oil) will also want to break away and become independent, leaving one of Russia’s main sources of income in ruin.

The only way to combat this prospect is for Russia to nationalize the oil industry and keep a prominent presence within each federal state. Such action will be a pitfall for all current foreign investment and a barrier to any future foreign investment.

Political Militancy

Chechen President Alu Alkhanov now has the most dangerous job in Russia. He must placate the Russian government, handle those eager for war in Chechnya, and convince the majority of the Chechen population that he is not merely a Russian puppet. The Russian-backed and “democratically elected” president of Chechnya with 73.5 percent of the vote, Alkhanov is not a popular choice despite what the elections suggest.

He does not command the sizeable amount of close personal supporters afforded to Akhmad Kadyrov, former Chechan President assassinated by a bomb in May 2004, and thus the only hope he has is through big business. He has already appealed to the Chechen elite housed in various Russian cities to come back to the impoverished state and bring with them the investment that is mandatory if Chechnya is to have a future.

Alkhanov is not a politician; he was Chechen Interior Minister after being head of the Grozny transport police from 1995-96. Although he was decorated for bravery in stopping rebel attacks on the Chechen capital, he will not be able to stand up to the Russian Bear politically, nor will he be able to offer incentives sufficient for investment. But most importantly, he will not be able to placate the likes of Aslan Maskhadov and Shamil Basayev, men Putin has labelled “terrorists.” Both men have already vowed to kill Alkhanov. (Maskhadov stated that he would kill the winner of the Chechen election before the results were even announced!)

Basayev is an Islamic fundamentalist and follower of The Wahabi sect. This is a very well funded, well organised, and violent offshoot of Islam that promotes Jihad and the expulsion of Muslims who do not follow its doctrine. The three countries that are most involved in the funding of this terrorist sect are Saudi Arabia (a staunch economic ally of the United States), Pakistan (another staunch ally of the United States in its “War on Terror”) and United Arab Emirates, which receives large amounts of foreign investment.

Aslan Maskhadov is a man who has fought on both sides of the Chechan conflict. Initially with the Soviet army in the suppression of the Nationalist movement in Lithuania in 1991, he won a landslide victory in the Chechen presidential elections in January 1997, the only election of recent times deemed fair by international monitors, with the promise “ reinforce the independence of the Chechen State.” However, he was unable to quell Wahhabism and other fundamentalist groups or to reign in his rival Basayev.

Risk and Reward

Is nationalization of Russian oil reserves, including those in Chechnya, a move that Putin would risk? It could prove to be economical (and therefore political) suicide. Many believe that he needs the West and the West needs him.

Although Putin has had some international reprieve from his dealings in Chechnya since the Beslan school tragedy, he is still walking a humanitarian tightrope. The Chechen question needs to be answered — and soon. No amount of rigged elections and Muscovite puppets are going to solve this problem, though nor will interference from large corporations or terrorist groups.

The key, as in every situation, is a compromise. The question is, with whom does one compromise? This brings us back to the original question: Who really holds the key to the future of Chechnya?

Putin holds the cards, yet it seems that the oil corporations have been dealt a good hand and are not willing to fold. Maskhadov has in some way been given a chance, but was unable to cash in and Besayev will never be asked to play. It also appears that once again the Chechen people have not been invited to the table.