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U.S./Russia: Experts Question Energy Cooperation Plans

  • Michael Lelyveld

Experts are doubtful about the outlook for a sudden increase in U.S.-Russian energy cooperation and investment, despite a joint declaration at last week's summit in Moscow. Russian oil companies have generally discouraged direct stakes in resources and development, while Moscow continues to oppose a key goal of U.S. policy for the Caspian Sea.

Boston, 29 May 2002 (RFE/RL) -- Despite the energy cooperation declared by Russia and the United States at last week's Moscow summit, experts see few signs of change in conditions for investment or Caspian policy.

Analysts view the joint declarations on energy by Presidents George W. Bush and Vladimir Putin as signs of good intentions rather than concrete steps for the Russian oil industry or the Caspian. They also question whether the "energy dialogue" announced at the summit will open up major opportunities for U.S. investment in Russia's energy sector.

In a paper to be published in the Russian journal "Demokratizatsiya" and reprinted last week by the Brookings Institution in Washington, Russia experts Fiona Hill and Florence Fee saw little chance for energy cooperation on a large scale. The analysts wrote, "There will be few major prospects for foreign investment in Russian oil and gas, especially for U.S. and other international companies seeking an equity stake in Russian energy reserves."

On 24 May, "The New York Times" reached a similar conclusion in a report on hopes for U.S. energy investment. The "Times" said that "Russian energy executives have opposed direct foreign involvement in Russian oil fields. Instead, they say, foreign companies should gain access to Russian crude by buying stock in Russian companies."

A U.S. government fact sheet distributed during the summit counted "seven U.S.-partnered joint ventures producing oil in Russia, with the largest producing about 50,000 barrels of oil per day." The summary added, "Looking ahead, major new foreign investment will be needed for Russia to maintain or increase oil production levels."

The largest energy contract signed during the summit was between U.S.-based ExxonMobil Corporation and Russia's Amur Shipbuilding Plant for a $140 million offshore drilling platform, "The Moscow Times" reported. But there have been no major new oil-field deals to launch the energy partnership, so far.

Analysts Hill and Fee also cast doubt on Russia's ability to challenge Saudi Arabia as a source of price stability in the world market, calling the idea "a cherished media myth." "Although Russia does have the potential to break into some specific global energy markets as a supplemental supplier to unstable states in the Persian Gulf, it cannot displace the Middle East as the world's primary supplier of oil, either in the near term or the long term." Russia's greatest influence would be in gas rather than oil, they said.

As for cooperation in the Caspian, the two countries are continuing to promote separate export routes for Azerbaijan's offshore oil in the Caspian, as they have for the past eight years. Hill and Fee note that Russia's LUKoil recently failed to win government approval to invest in the Baku-Tbilisi-Ceyhan oil pipeline project, which has been a key policy objective for Washington.

In an interview with RFE/RL, Robert Ebel, director of the energy and national security program at the Center for Strategic and International Studies in Washington, was asked whether the summit would change Moscow's policy toward the pipeline: "I wouldn't think so. It does not change it at all." Ebel said Russia is unlikely to oppose the Baku-Tbilisi-Ceyhan pipeline openly, but will instead continue to argue that it is not commercially viable.

A joint statement at the summit said, "We also welcome the opportunity to intensify cooperation in energy exploration and development, especially in oil and gas, including in the Caspian region." It noted the successful opening of the Caspian Pipeline Consortium's oil line from the Tengiz field in Kazakhstan to the Black Sea port of Novorossiisk, which was supported by both Russia and the United States. The statement called for more projects in the fuel and energy sector, but the joint support for the pipeline known as CPC seemed to be an example of shared interests from the past rather than a sign of a breakthrough on pipeline policy to come.

So far, there have been few indications that the experience of the CPC pipeline will be repeated in the case of Baku-Tbilisi-Ceyhan. Detailed engineering on the pipeline to Turkey is reportedly due to be finished next week with authorization for construction expected later next month. Russia prefers a route over its own territory to Novorossiisk.

The disagreement over Baku-Tblisi-Ceyhan may leave proponents of the new energy partnership with a choice between treating the issue as an exception to an otherwise harmonious relationship or a proof that it is severely limited in scope.

Ebel was generally skeptical of the summit's accomplishments in the energy field: "You can say it's window-dressing, designed to show that summits are useful. They can say, look what we did on energy."

Ebel noted that Russia has yet to produce new legislation for production-sharing agreements that are needed for foreign investment in its oil fields. "If I were a potential investor, I would say this doesn't do anything for me."

He also doubted that Russia's oil from western Siberia would be competitive for sale in the United States because of the distance for transport. Officials have reportedly discussed the purchase of Russian oil for the U.S. Strategic Petroleum Reserve. Ebel said such a plan could be pursued, but U.S. officials would only be likely to make purchases over time when oil prices are lower than they are now.