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Joint work is the best diplomacy

Interview with President of Kubanneftegazstroy Association.

On February 23, 2003, Presidents of Russia, Ukraine, Belarus and Kazakhstan signed the "Declaration on Common Economic Space" (CES). They announced that these States wanted to create within their common territory a common space for free movement of goods, services, labor force and capital as well as to harmonize their economic laws so as to promote developing all forms of trade and production cooperation. The presidents stated the intent to establish a commission on tariffs and trade that would, independently of their governments, work on preparing the initial phase of CES integration – the free trade zone – and coordinate negotiations of all CES participants with the WTO for securing an agreed-upon position. They also noted a possibility of setting in the future a common currency space.

On September 19, 2003,during the CIS summit meeting in Yalta the Concept of and Agreement on Common Economic Space between Russia, Belarus, Kazakhstan and Ukraine were initialed. The possible emergence of "the Big Four" post-Soviet States inspired public, political and scientific discussions of geopolitical and economic prospects for establishing a system of regional integration in the CIS. The Technopolis-XXI magazine asked president of Kubanneftegazstroy Association Vladimir Andreichev to share his views in this respect. Vladimir Andreichev is one of the most authoritative Russian managers with a solid experience of doing business with CIS countries.

Mr. Andreichev, your Association participated in implementing world-class investment projects, such as the Caspian Pipeline Consortium (CPC) with the Tengiz-Novorossisk pipeline to transport oil from Kazakhstan to the Novorossisk-2 terminal, the Blue Stream Russian-Turkish gas pipeline that is laid on the bottom of the Black Sea and that has no equals. Or take, for example, Sakhalin-2. All these projects are transnational by definition: the complex of oil and gas pipelines – trunk pipelines, pumping and compressor stations, gas storages, construction of which Kubanneftegazstroy specializes in – is one of the most impressive mechanisms of today's world integration, including the post-Soviet economic space that can be unified not so much by political declarations as by solid projects. The majority of analysts believe that these are, mainly, projects to build transport corridors and projects in the power engineering and oil-and-gas industries. What, in your opinion, are the prospects for integration within the framework of the CIS and what can the Russian business do so as to expand it?

The very specialization of Kubanneftegazstroy Association assumes, of course, the international cooperation. It makes no sense to construct large pipelines within just one country because it, in fact, means selling oil and gas to oneself. Even more so that Russia – and it is obvious – is living now at the expense of its natural resources. In this sense Kazakhstan is our most serious partner for the foreseeable future.

The political and economic link between Russia and Kazakhstan is evidently taking the lead on the post-Soviet space. Both countries are carrying out similar economic reforms and this allows the Kazakh business to draw, to a large extent, on Russians' experience and vice versa. Preserving in Kazakhstan the official status of the Russian language as a language of communication between the two nations also makes its contribution to this. Practically all TV channels in Kazakhstan keep broadcasting in Russian as well.

Kazakhstan is Russia's historic partner and one of the richest states in Eurasia, its bowels contain almost all of Mendeleev's periodic table. However, the country is located aside the world's transport corridors and it does not have a direct entry in developed markets. That is precisely why steadily making its way into the market economy Kazakhstan is objectively interested in creating a favorable environment to attract investments, set up joint ventures and expand its multilateral cooperation with Russia. It actively seeks the fastest possible formation of a common economic space.

In my view, neither Ukraine nor Belarus are ready now for the similar close interaction. The prospects of Ukraine's entry in the European Union are more attractive to its authorities than the consolidation of ties with Russia. There is an apparent cooling-off period in relations between Russia and Belarus. Differences in economic laws of our countries are having an increasingly negative impact on plans of corporations like Kubanneftegazstroy.

Practically all intergovernmental associations in the CIS have never reached even the initial level of the regional integration, i.e. creation of full-fledged free trade zones. But let us imagine that, nevertheless, such a zone will be established in quite a significant segment of the post-Soviet space, say, within the framework of the Russia-Belarus-Kazakhstan triangle. What impact will it have on activities in your industry? What and where will Kubanneftegazstroy gain and what and where will it lose in this case?

We will have more work to do. Workers in Belarus and Kazakhstan, of course, are in no way worse. But let me tell you straight that there are no more than five enterprises throughout Russia that can be compared with Kubanneftegazstroy by the availability of special machinery and transport as well as by the professional skill of specialists. So, in any case we will not stay idle. But a full-fledged competition is an undoubtedly necessary thing, it is the engine of progress. Something will be lost by Russia, other CIS countries will also lose something but, as a whole, all will gain because joint work is the best diplomacy when forming any union, including our Eurasian Economic Community. Building and trading are always better than fighting. This truth does not need to be proved.

Unfortunately, just a few people remember that the common economic space within the Eurasian Economic Community should have been in effect already this current year. It is a manifold question – why this integration association has not emerged? From my point of view, those, who started this really serious undertaking, have not grown up to its level themselves. It would be a pity, if a similar misfortune also befell the Declaration "On Common Economic Space" signed in February 2003 by presidents of Russia, Ukraine, Belarus and Kazakhstan. They all are mature politicians and quite sensible economists. It is clear not only to any serious entrepreneur in those same Belarus and Ukraine but to any citizen in these countries, who is far from politics, that such an economic union will bring benefits to all our states and peoples. That is why their political leaders and businesses should show their will, maturity, wisdom and civil responsibility. Sooner or later the integration within the framework of the CIS will take place and it will bring prosperity to all post-Soviet countries.

Russia's business is already working for the sake of such an integration. A good example is the cooperation of Kazakhstan's leadership with the Russian oil company Lukoil and many others.

The obvious way to the real economic integration is joint projects that make it possible to invest russian capital in other CIS countries and , vice versa, their capital in Russia. But, on the other hand, CIS countries are rivals precisely in the oil-and-gas sphere. And, if Russia does not show enough flexibility, Kazakh oil will start forcing Russian oil out from world market. Apparently, the same can be said of Uzbek and Turkmen gas?

Of course, it is not all that simple in this respect. According to data of economic reviews, Russia is even incurring losses from pumping Kazakh oil over its territory. On the other hand, one had always to pay for integration, wherever it happened, including the European Union. And since Russia's business is stronger than any other on the post-Soviet space, the country is objectively interested in abolishing various economic barriers and it should be more active in assisting its business' advances to the South, to the West as well as to the East. The role of bilateral relations, contracts, intergovernmental agreements is extremely important. But so far Russia's economic and political abilities are rather limited. In my opinion, its influence will be increasing as much as its ability to offer anything for export besides raw materials. In recent years the leading CIS countries seemingly made a considerable progress on the way to market economy. But against the background of the economic potential of the post-Soviet space those are just the first timid steps and the real volume of investments is absolutely inadequate to this potential.

For me CPC is almost a personal matter. In part, this is also my offspring, a number of its facilities, no matter how small it is, was built by our Association. And there are still more than 100 idle wells at the Tengiz field. The increase in oil production is kept back precisely because of the lack of pipelines. The rise of volumes of pumping Kazakh oil is technically impossible without constructing additional pumping stations. And for me job naturally comes first, not politics. It is three and a half thousand workers at Kubanneftegazstroy with their families. The logic chain is obvious: forming a common and free economic space – countries' development – raising people's living standards. But, again, this is a matter of political schemes. And I feel closer to the interesting and promising business, which is needed by all. By our country and by the people, who live here.

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