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The Dallas Morning News: U.S. oil companies get cold shoulder from Russia

Published: Jan 16, 2007
Jim Landers, The Dallas Morning News – Texas – KRTBN

WASHINGTON — What does it take to convince Russia that partners for prosperity don’t put tourniquets on each other’s lifelines?

This is a question for European politicians, who for two winters in a row have seen Russia halt energy deliveries in disputes both commercial and political with its neighbors.

It’s important at home as well. U.S. companies such as Exxon Mobil Corp. face similar muscle-flexing from the Russians. And a Europe uncertain about Russia as a reliable supplier will compete more vigorously with Americans and Asians for energy supplies on the global market.

Earlier this month, Russia locked horns with Belarus over the price of Russian oil and gas. Russia has been supplying energy at below-market rates for many years.

But Belarus balked at a merger plan between the two nations. Moscow decided to raise prices.

Belarus responded by raising transit fees for an oil pipeline between Russia and Germany and siphoned off oil as payment.

Russia closed the pipeline.

A similar dispute last year between Russia and Ukraine led to the closure of a natural-gas pipeline supplying Germany and other European countries.

Both disputes were resolved fairly quickly. But both also showed Germany how Russia can be an unreliable supplier.

Unreliable suppliers see customers go shopping somewhere else.

And Europe is trying to promote gas pipelines from Central Asia, via Turkey and the Balkans, as an alternative to Russian gas, along with liquefied natural gas from Africa.

Yet a web of connected concerns makes it hard for Germany, in particular, to turn away from Russia.

Germany wants a commercial partnership with Russia, and Russian President Vladimir Putin has been enthusiastic.

Former German Chancellor Gerhard SchrAder now chairs the company building a natural-gas pipeline across the Baltic Sea between Russia and Germany.

U.S. companies (and U.S. consumers who were to get shipments of liquefied natural gas) were shut out of Russia’s search for partners to develop the Shtokman gas field in Siberia.

Germans were invited to participate, and the Shtokman gas will flow through the Baltic Sea pipeline.

The appeal of Russian gas is more than commercial.

Germany wants to move its electric power industry away from climate-warming coal toward cleaner-burning fuels.

Germany’s Green Party has fought vigorously against nuclear power and got the government to agree to shut all of Germany’s nuclear power plants by 2020.

That leaves such renewables as wind power and natural gas as the most viable fuels for German electricity.

Russia is the nearest, most promising source of gas for Europe and lessens the continent’s dependence on energy supplies from the Persian Gulf, which is heavily under American influence and chronically unstable.

Germany is hoping that interdependence will make Russia a more reliable supplier, but Moscow has spurned that strategy.

Russia wants access to distribution systems in Western Europe, but the Europeans want reciprocal access to Russian energy and pipelines.

So far, Russia has refused.

Under Mr. Putin, Russia has been reducing the participation of outsiders in the oil and gas sector.

Shell sold a large interest in its Sakhalin gas project to the state-owned Gazprom after a series of harassing tax and environmental steps by the Russian state.

Irving-based Exxon Mobil is coming under similar pressure.

On Monday, Mr. Putin explained some of the terms of the new deal with Belarus and characterized it as a transition to market relations.

There’s more to it than that, however.

World prices are likely to undermine the economic situation in Belarus, which some analysts say could lead to regime change.

So the search continues for a way to deal with Russia’s worsening reputation as an energy supplier.

Klaus Scharioth, Germany’s ambassador to the United States, summed up the problem last week:

“We have to see to it we come up with a policy that makes it impossible for outside parties to blackmail us.”

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