Much ink was spilled in the initial enthusiasm for Russian oil, about the desirability of upgrading Russia's oil pipelines. In the early 1990s, both the EBRD and the leaders of the then-European Community made strong statements that they were prepared to invest in this field.
Western oil companies have argued that the inflow of their capital would benefit the oil infrastructure as well as the production wells. The newly signed Energy Charter was meant to serve this purpose, however, as Greenpeace warned when the Charter was signed by 35 countries in December 1991, this charter has simply resulted in a `free-for-all' for the western oil interests. The Charter is an open invitation for Western oil companies to exploit Soviet oil and gas reserves, with very little in return. Greenpeace also warned that the multinationals were unlikely to spend their money upgrading the Russian infrastructure.
A recent European Commission proposal [21 September 1994] to the European Council of Ministers details policies and actions which should be undertaken by energy investors in Russia. The polluter should pay for cleanup costs for pollution, including transboundary pollution. Investors should investigate energy efficiency and renewable energy sources.
However, given the credit system negotiated by joint ventures, these protocols would not make any difference to the state of the Russian tundra. Komineft, the pipeline operator, has no money to clean up the spills.
The main pipeline carrying oil from the Timan-Pechora Basin is severely corroded and leaking. Western investment has not flowed to the maintenance of this pipeline and as a consequence, major losses of oil into the environment have become virtually `business-as-usual'.
The local oil pipeline is owned and operated by KomiNeft, the state-owned entity created in the disaggregation of the Soviet oil monopoly. KomiNeft is also the dominant partner in the major joint ventures in the region (Polar Lights, KomiArcticOil, KomiQuest), and receives fees from the producers for oil pumped into the pipeline at the well-head.
Oil executives east and west have known for years that the pipeline situation in Russia was deteriorating. By some estimates, 55 per cent of the country's 75,000 km of pipeline needs to be replaced. The EBRD made strong statements during the 1991-92 period that their priority for funding in Russia would be upgrading infrastructure, including pipelines. To date, the Bank has made no loans for this.