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The Wall Street Journal: Tougher Rhetoric: Shell and BP investments in Russian energy

June 3, 2007 6:03 p.m.

Excerpts from an interview Russian President Putin gave a small group of G-8 journalists on June 1, 2007.

On Shell and BP investments in Russian energy:

[Shell’s contract on Sakhalin] was a colonial agreement. It had nothing in common with the interests of the Russian Federation. I regret that at the start of the 1990s, Russian officials allowed themselves to sign up to this, something they should in fact have been jailed for. According to this agreement, we allowed others to exploit our natural resources for an extended period but got nothing in return — almost nothing.

But if our partners had fulfilled the terms of this agreement as they should have done, of course we wouldn’t have had the chance to correct it. But they are guilty themselves in so far as they breached ecological legislation. That’s been recognized and confirmed by objective data. Our partners don’t even deny that.

When ecological problems were uncovered and the possibility of fines arose, the entry of Gazprom saved the project. Gazprom didn’t simply enter the project under pressure from us. They paid out huge funds to be able to join the project. Eight billion dollars. It was a market price. As far as I understand, our partners were mostly satisfied with the outcome.

On BP’s Kovykta project:

In every country there are certain rules for working with mineral wealth. Those rules exist in Russia, too. If someone thinks that in Russia those rules don’t need to be observed, they are mistaken. We’re not just talking about BP or foreign partners here; there are Russian economic partners and residents involved in this, too. They took on this project and responsibility for exploiting these resources, but unfortunately didn’t fulfill the conditions of the license. They still haven’t started production. Last year, according to the license, they were supposed to start extraction and take out a certain quantity of gas, but unfortunately they didn’t do this.

There are a mass of complications associated with this, such as getting access to the pipeline network, but they knew that when they obtained the license. They knew about these problems and about the possible limitations. I won’t even mention how this license was obtained in the first place. There are about three trillion cubic meters of gas there, almost as much as Canada’s entire reserves, so you can understand the importance of this for the country. If they’re not doing anything to develop it, how long should we put up with this?

Clearly the Ministry of Natural  Resources has raised the question about the withdrawal of this license, although for now talks are going on. I don’t know how they will finish. I don’t know what decision the ministry will take and the shareholders of the company. In BP’s case its reserves are growing in large part thanks to Russia… and 25% of its revenues are from Russia. We welcome their participation in the Russian economy and will continue to help and support the company… but only in the framework of current legislation.

 

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