As
the United States seeks to strengthen sanctions on Moscow for its
occupation of Crimea, energy experts say the powerful Russian oil
industry would make a robust target.
But any penalties on energy
investments, technology transfers and financial transactions would most
likely also punish Western oil companies like Exxon Mobil that are
investing heavily in Russia. “Everything
is on the table,” said David L. Goldwyn, the State Department’s
coordinator for international energy affairs during President Obama’s
first term. “The calculus has to be who will be hurt most, us or them,
if sanctions are put in place.”
As
the heart of the Russian economy, the energy sector — led by state oil
companies like Gazprom, Lukoil and Rosneft — would be a natural focus
for pressure from the United States and its allies. Oil and petroleum
products represent more than two-thirds of Russian export earnings, and
they finance just over half of the federal budget.
But
the rub is that the interests of the Russian companies — many led by
powerful allies of President Vladimir V. Putin — are increasingly
entwined with those of American and European corporations, with which
they share critical projects.
Exxon
Mobil, which is based in Texas and has been investing in Russia for two
decades, is exploring for oil and gas in the Russian Arctic and has
several joint ventures with Rosneft in and outside Russia. Most notably,
the company operates and owns a minority stake in what it describes as
the largest offshore oil and gas project in the country, Sakhalin 1,
which Exxon Mobil says will produce 630 million barrels of oil.
Exxon
Mobil’s oil and gas production in eastern Siberia now represents less
than 1.5 percent of the company’s worldwide output. But the company’s
participation in Russian oil operations is important for its future, and
for the Russian energy sector.
Russia
hopes Exxon Mobil can aid in shale oil development in Siberia and in
offshore Arctic exploration. These new oil production sources, energy
experts say, are critical if Russia hopes to maintain its output of 10
million barrels a day, which is expected to decline by a million barrels
by the end of the decade.
At
a conference with Wall Street analysts on March 5, Rex Tillerson, chief
executive of Exxon Mobil, said, “In terms of our view of country risk,
our view of the geopolitical risk and our ability to manage that, other
than things like sanctions, which have affected us before, we don’t see
any new challenges out of the current situation.”
“That statement still stands,” Alan Jeffers, a company spokesman, said Thursday. Just last year, Mr. Putin gave Mr. Tillerson the Order of Friendship award as a token of Russia’s gratitude to the company.
Other
Western oil companies also face potential difficulties in Russia. BP
has sold many of its Russian holdings, but it still holds a 19.6 percent
stake in Rosneft, which contributed $1 billion in profit to BP in the
fourth quarter of last year. Eni of Italy and Statoil of Norway also
coordinate with Rosneft in Arctic exploration. Eni and other Western
companies are heavily involved in plans by Gazprom to build a major gas
pipeline from Russia to Europe, but that project is now in doubt,
according to Eni’s chief executive, Paolo Scaroni.
Royal
Dutch Shell and Total, the French oil giant, are invested in the
nascent Russian business of exporting liquefied natural gas. Several
Western service companies are also involved in Russia, drilling and
completing wells with the newest hydraulic fracturing technologies.
Sanctions
on investments, technology deliveries and financial transactions have
been central to United States policy toward Iran and North Korea in
recent years, but energy and foreign policy experts say the intimate
links between American and Russian energy companies would make sanctions
on Russian energy companies awkward if not painful for the West, and
the sanctions would probably be resisted by Western oil companies.
“Russia
is deeply integrated in the global economy and that creates challenges
for any sanctions strategy,” said Michael A. Levi, a senior fellow for
energy and the environment at the Council on Foreign Relations. But he
added that stronger sanctions might eventually be necessary “because we
have a big problem.”
Energy
experts say tough sanctions on Russian oil companies would require
coordination with Europe, and maybe tacitly with China, so that Russian
companies would not simply replace American partners with other foreign
companies.
“It
was easier to do this with Iran, because how many American companies
were doing business with Iran after 1979?” noted Helima Croft, a foreign
policy expert at Barclays Capital. “Escalating to sanctions on
relations between U.S. and Russian companies would require a more
significant escalation by Russia,” like an invasion deeper into Ukraine,
she added.
So
far, Congress has increasingly pressed the Obama administration to
quicken the pace of approvals for natural gas export terminals, with the
aim of easing European dependence on Russian gas. The Energy Department
has been only gradually approving such terminals, which in any event
could not alleviate European dependence until nearly the end of the
decade.
The
administration’s sanctions have been broadly worded but specifically
involve only limited asset freezes and travel bans. Gennady Timchenko, a
billionaire oil trader and one of Russia’s richest businessmen, has
been a target of the sanctions, along with two oil contractors.
In
a recent commentary, Julia Nanay, a Russia and Caspian region energy
expert with the IHS Energy consultancy, predicted that Western sanctions
would slow investment into Russia at a time when Russian companies are
starting projects for exploration, pipelines and the export of liquefied
natural gas.
http://www.nytimes.com/2014/03/28/business/energy-environment/potential-crackdown-on-russia-risks-also-punishing-western-oil-companies.html?_r=0
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