Thursday, November 06, 2003

Israeli Pipeline To Move Russian Oil

JERUSALEM (AP) -- Russian oil will begin flowing through an Israeli pipeline in late November, the pipeline's director said Wednesday, signaling a new chapter in rapidly improving relations with Moscow.

The announcement came on the same day Prime Minister Ariel Sharon returned from a three day visit to Moscow, where he discussed political and trade ties, and the Middle East peace process with President Vladimir Putin.

The Russian oil will move through the Eilat-Ashkelon Oil Pipeline Co., according to its director, Emmanuel Sakal. He said the oil was earmarked for markets in the Far East, a major focus of Russia's developing export strategy.

Sakal would not say how large the shipments would be, which companies were providing them, or give a dollar value on the deal.

Oil analyst Valery Nesterov of Troika Dialog in Moscow said Lukoil and Rosneft, which have production facilities in southern Russia, would be the likeliest candidates to exploit the facility.

About 80 percent of Russia's 126 million gallons per day of oil exports go to Europe, with about half of the rest heading for the Far East.

However, Nesterov said, Russia is keen to increase its Asian oil sales.

"Russian oil companies are eying the Far East because the European markets are congested," he said.

The 158-mile Eilat-Ashkelon pipeline was built in the late 1960s by Israel and Iran to move Iranian oil to markets in Europe and the United States. It provided a convenient link between the Red Sea and the Mediterranean Sea, instead of the costlier route around South Africa's Cape of Good Hope.

Since the Iranian revolution in 1979 ended Iranian-Israeli diplomatic and trade relations, the pipeline has been limited to moving relatively small amounts of Egyptian oil from fields in the Sinai Peninsula to northern Israel for refining. The pipeline can move about 46.2 million gallons of oil per day.

In the past two years, Sakal said, the company has completed a project to reverse the direction of the line from north to south. This would allow for shipments of Russian oil to reach the Mediterranean port of Ashkelon, be sent to Eilat and over the Red Sea toward the Far East, where demand is growing fastest.

Russia is considering a number of pipeline projects between yet- untapped oil reserves in eastern Siberia and markets in South Korea, China and Japan, but those plans are still many years off.

Large portions of Russian oil exports to the Far East currently move by rail through Siberia.

A spokesman for Sharon said Israel and Russia have a common interest in exploiting the Eilat-Ashkelon pipeline.

"We want to make money from this (through transit fees) and the Russians want to send oil through it," said the spokesman, Raanan Gissin.

Russia's relations with Israel have improved dramatically since the Soviet collapse in 1991, and Moscow has played a role in peace efforts as part of the international quartet that includes the United States, the United Nations and the European Union.

The presence of 1 million Russian-speaking immigrants, one-sixth of Israel's population and a powerful political force, has become an important factor in bilateral relations.

By Peter Enav, Associated Press Writer, 11-6-3, Guardian Unlimited

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