Russia pumps politics into oil deal

Stephen Beard Aug 4, 2006

KAI RYSSDAL: After a spike earlier this week natural gas prices dropped just a bit today. Cooler weather back east helped. So did a report yesterday showing US inventories are higher than we thought.

The search for more natural gas goes on. And later this month Russia’s expected to award one of the biggest energy exploration contracts ever. But the US might be shut out, as Stephen Beard reports from the European Desk in London.

STEPHEN BEARD: Shtokman is the largest natural gas field on earth. High up in the Arctic it contains an estimated 3.7 trillion cubic meters of gas. Five foreign companies are vying to take part in the project — two Norwegian firms, Total of France, and Chevron and Conoco Phillips of the US.

Usually the Americans would be frontrunners in the race. But not this time:

President Putin showed his irritation with America during the recent G8 summit in St. Petersburg. And this could affect the Americans’ chances with Shtokman. Putin was clearly annoyed that the US blocked Russia’s bid to join the World Trade Organization.

NICK REDMAN: Well, the Russians don’t like the idea of a big club that they’re not a member of. And the WTO is the biggest one. And Russia is currently the biggest non-member of the WTO in the world.

Nick Redman of the Economist says after the rebuff, Putin retaliated with subtlety. He praised the Norwegian firms that are competing for the Shtokman contract:

REDMAN: He’s not come out publicly and said: “Americans aren’t going to get a share of Shtokman.” Simply by praising the Norwegians he’s left things suitably open — a hint to those who have ears open for it.

If the American firms are shut out, it won’t be the first time the Kremlin has used energy as a political weapon. Vice President Dick Cheney accused the Russians of “intimidation and blackmail” when they briefly cut gas supplies to Ukraine earlier this year. Chris Skrebowski of Petroleum Review calls Putin “The Energy Czar”:

CHRIS SKREBOWSKI: He is certainly going to extract every last bit of profit out of Russian resources — and political advantage too.

Some analysts say Putin can’t exclude the Americans from Shtokman since the Russians hope to sell a lot of the gas to the US. But Skrebowski says the Russians can just as easily sell to the Europeans. And there’s another factor. If the Americans are shut out, it may play well with the Russian public.

In Moscow, this lady — an interior designer by trade, detects a new anti-American mood among her fellow citizens.

RUSSIAN WOMAN: They start to think again: “America is our enemy.” I’m sure they didn’t think about it 10 years ago. As I know, America was a dream for many people to go there and live. And now, a lot of them say: “Well, America is against us.”

She says the mood emanates from the political elite. A further sign, perhaps, of Russia’s growing assertiveness and a readiness to take on the old foe on the new battleground of energy.

In London, this is Stephen Beard for Marketplace.

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