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Marketplace.ca: Shell gives in to Russia: ‘Shell has caved in to pressure from the Kremlin’

Public Radio Transcript. Monday, December 11, 2006

Shell has offered to give up control of a $22 billion oil and gas project in Russia after months of pressure from the Kremlin. Stephen Beard reports.

MARK AUSTIN THOMAS: The Anglo-Dutch energy company Shell has caved in to pressure from the Kremlin. It has offered to give up control of a giant oil and gas project in Russia. That word from the Reuters news agency this morning. From London, Stephen Beard reports.

STEPHEN BEARD: The Sakhalin 2 natural gas project on the Russian Pacific Island of Sakhalin is the biggest of its kind. It’s costing $22 billion to develop.

But for a long time it’s rankled with the Kremlin that no Russian companies are involved, let alone in control. Shell has 55 percent.

Now, according to Reuters, they’ve agreed to sell a large chunk of that share to the Russians, putting the state-owned Gazprom in the driving seat. This follows months of pressure from the Kremlin.

Or bullying says Nick Redman of the Economist Intelligence Unit.

NICK REDMAN: I think we can call it bullying and it certainly looks like it’s worked. A great deal of pressure has been applied on an incumbent foreign investor, in order to come to terms, in order to allow a Russian company to step in.

But The Kremlin claims that Shell has broken environmental laws and that cost overruns on the project would deprive the Russian treasury of royalties for many years to come.

In London, this is Stephen Beard for Marketplace.

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