Lack of Russian capital - cash, bank loans, and unsecured money from the international share markets - has begun forcing a change in the thinking of Prime Minister Vladimir Putin and his resource boss, Deputy Prime Minister Igor Sechin, not to mention Russia's heavily indebted energy and mineral companies. Over the past month, Putin and Sechin have made a public show of support for investments by Total of France, and the Anglo-Dutch Shell group in Arctic and Pacific Ocean oil and gasfields, which were put off-limits to foreign companies little more than a year ago, following the enactment in April 2008 of the strategic resource exclusion law. That prohibits foreign acquisition of more than 50% of a Russian company with reserves above the statutory threshold - 70 million tonnes (490 million barrels) of oil; 50 billion cubic meters of gas; 50 tonnes (1.6 million ounces) of gold; and 500,000 tonnes of copper. In the past month also, a leading Russian coalminer, several goldminers, and a rising iron-ore developer have all gone public to advertise their desire to find Chinese investors to supply the cash for their new projects. This is a complete reversal of the Russia-first policy for Russian energy and mineral investment which Putin introduced in 2003, with the arrest and conviction of Mikhail Khodorkovsky, after he attempted to sell control of the Yukos oil company to US interests. Whether the Kremlin intends to go back to the Yeltsin-era idea of giving foreign companies special incentives, tax holidays, and investment protection, it is too early to say.
Over the past month, Putin and Sechin have made a public show of support for investments by Total of France, and the Anglo-Dutch Shell group in Arctic and Pacific Ocean oil and gasfields, which were put off-limits to foreign companies little more than a year ago, following the enactment in April 2008 of the strategic resource exclusion law.
That prohibits foreign acquisition of more than 50% of a Russian company with reserves above the statutory threshold - 70 million tonnes (490 million barrels) of oil; 50 billion cubic meters of gas; 50 tonnes (1.6 million ounces) of gold; and 500,000 tonnes of copper. In the past month also, a leading Russian coalminer, several goldminers, and a rising iron-ore developer have all gone public to advertise their desire to find Chinese investors to supply the cash for their new projects.
This is a complete reversal of the Russia-first policy for Russian energy and mineral investment which Putin introduced in 2003, with the arrest and conviction of Mikhail Khodorkovsky, after he attempted to sell control of the Yukos oil company to US interests. Whether the Kremlin intends to go back to the Yeltsin-era idea of giving foreign companies special incentives, tax holidays, and investment protection, it is too early to say.
A hat tip to Karon for passing it on.
John Helmer in Moscow The Russian and Azeri governments have taken the air out of a scheme to provide Europe with an alternative source of gas supply to Gazprom, which signed an agreement on Monday with the State Oil Company of the Azerbaijan Republic (SOCAR). When it comes to putting the gas into high-priority political schemes for Europe's energy needs, the Kremlin proves once again that it is prepared to put money where its mouth is, while the European Union raises hot air in think-tanks and editorial columns. The new deal, signed in Baku during a visit by President Dmitry Medvedev, provides for Gazprom to begin purchasing gas from Azerbaijan from the start of next year. The initial volumes are very small -- just 500 million cubic metres per annum. But they give Gazprom the option to increase them, as Azeri production from the Shah Deniz field, in the Caspian, ramps up. "All things being equal among potential buyers, priority will be given to Gazprom," Gazprom CEO Alexei Miller said at the signing ceremony. "Other buyers would have to offer conditions that are more financially attractive." [...] In the feasibility and bankability stage of the Nabucco pipeline, western investors and governments have now to worry that they cannot afford a bidding contest with the Kremlin over the price of Shah Deniz gas. And if Nabucco is deflated before it starts, the political dividend earned by the Kremlin can be translated into more flexible pricing later on, when South Stream starts delivering. As Medvedev explained in Baku, the agreement has been devised "absolutely not on political motives but on mutual benefits." Nabucco, Miller implied, has been a political "fetish".
The Russian and Azeri governments have taken the air out of a scheme to provide Europe with an alternative source of gas supply to Gazprom, which signed an agreement on Monday with the State Oil Company of the Azerbaijan Republic (SOCAR). When it comes to putting the gas into high-priority political schemes for Europe's energy needs, the Kremlin proves once again that it is prepared to put money where its mouth is, while the European Union raises hot air in think-tanks and editorial columns.
The new deal, signed in Baku during a visit by President Dmitry Medvedev, provides for Gazprom to begin purchasing gas from Azerbaijan from the start of next year. The initial volumes are very small -- just 500 million cubic metres per annum. But they give Gazprom the option to increase them, as Azeri production from the Shah Deniz field, in the Caspian, ramps up. "All things being equal among potential buyers, priority will be given to Gazprom," Gazprom CEO Alexei Miller said at the signing ceremony. "Other buyers would have to offer conditions that are more financially attractive."
[...]
In the feasibility and bankability stage of the Nabucco pipeline, western investors and governments have now to worry that they cannot afford a bidding contest with the Kremlin over the price of Shah Deniz gas. And if Nabucco is deflated before it starts, the political dividend earned by the Kremlin can be translated into more flexible pricing later on, when South Stream starts delivering. As Medvedev explained in Baku, the agreement has been devised "absolutely not on political motives but on mutual benefits." Nabucco, Miller implied, has been a political "fetish".
Russia is buying Azerbaijani gas because it has a pipeline to actually take the gas. The alternatives don't (there is a pipeline going to Turkey, but its capacity is already fully used by BP's Shah Deniz production in Azerbaijan) In the long run, we're all dead. John Maynard Keynes
