Posted on 11/14/2003 7:51:59 AM PST by Cathryn Crawford
Ventures in Russia may not be secure: Putin's moves to curb oil tycoon threaten U.S. investments
By JIM LANDERS
WASHINGTON – The struggle between President Vladimir Putin and jailed oilman Mikhail Khodorkovsky is a nasty political brawl with major consequences for the future of democracy in Russia.
But it is already consequential to the energy futures of China and the United States.
Yukos Oil Co., Mr. Khodorkovsky's company, delivered the first cargo of Russian oil to Houston on July 3, 2002. A year later, Russia ranked sixth among the countries selling oil to the United States, providing 550,000 barrels a day.
Mr. Khodorkovsky then cut a deal with four other Russian companies to build an export pipeline and terminal near Murmansk. The project aimed to raise Russian oil exports to the United States to 2 million barrels a day – an amount that would put Russia on par with Canada, Mexico and Saudi Arabia.
Yukos has also signed agreements with China to build a pipeline from Eastern Siberia to Manchuria that would ship more than 500,000 barrels of oil a day.
But Mr. Putin's government controls Russian oil exports through state ownership of export pipelines and terminals. The idea that Yukos would cut its own deals rankled Russian energy bureaucrats, who objected to both proposals.
Transneft, the Russian national pipeline company, iced the deal with China in January in favor of another line to the Pacific targeting Japan, which angered the Chinese. The Murmansk proposal lives on, winning favorable notice in U.S.-Russian presidential summits. But it remains to be seen who will build it and who will pay for it.
A Transneft vice president said last week that a Murmansk pipeline feasibility study will be done in the fall of 2004 but that the pipeline's capacity will have to be trimmed to accommodate another Transneft pipeline to the Baltic.
When Mr. Khodorkovsky was arrested, Yukos was completing a merger with Sibneft, another Russian oil firm, that would make YukosSibneft the largest Russian oil company and one of the largest oil producers in the world.
Houston-based ChevronTexaco Corp. was widely reported to be in discussions with the company for a stake as large as 40 percent.
Irving-based Exxon Mobil Corp. was also reported to be talking about buying a piece of Yukos, though Mr. Khodorkovsky said that dialog was between Exxon Mobil and Mr. Putin.
ChevronTexaco and Exxon Mobil have declined to comment.
Russian and U.S. analysts say Mr. Khodorkovsky was asserting himself in the Russian president's domain.
"Khodorkovsky began to initiate interesting projects: the Murmansk oil pipeline, then Daqing [Manchuria], energy dialogue with the United States, and so on," said Lilliya Shevtsova of the Moscow Carnegie Center. "He began doing what in Russia can be done only by the president."
Harley Balzer, a government professor at Georgetown University, views Mr. Khodorkovsky's arrest as an unfortunate attempt by Mr. Putin's government to regain control of Russian oil and natural gas.
"We don't need more OPEC-like entities," he said. "Our interest is Russia producing the maximum volume of oil and gas at the lowest possible price, and doing it in ways that maximize the total yield from their fields."
This summer, Mr. Putin asserted that Russia has a right to protect its national interests from any interference with the oil and natural gas pipelines crossing the borders of the former Soviet Union.
In September, he met with President Bush at Camp David, Md., and suggested that Russia's "very high level energy dialogue with the United States, including at the very top level," had saved American motorists from a gasoline price shock during the Iraq war.
From his jail cell, Mr. Khodorkovsky has severed his ties with Yukos. That should have been the end of the affair as far as U.S. business interests are concerned. But Mr. Putin's government froze 44 percent of the shares of Yukos and has threatened to revoke its licenses for several oil fields.
"That's a very big deal," said Blake Marshall, executive vice president of the U.S.-Russia Business Council. "It's safe to say that will give investors pause."
Sen. John McCain, R-Ariz., says the Yukos affair reflects Mr. Putin's interest in "neo-imperialism abroad, and authoritarian control at home.
"The American business community should consider itself warned: Your investments are not safe," Mr. McCain said.
E-mail jlanders@dallasnews.com
Kinda like looking in a mirror eh John.........
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.