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Dow Jones Newswires: UPDATE: Putin Spokesman: Kremlin Not Involved In Sakhalin Row

June 28, 2007: 12:13 PM EST

(Updates with more quotes, background.)

NEW YORK -(Dow Jones)- A spokesman for Russian President Vladimir Putin said Thursday the Kremlin isn’t involved in a disagreement between the state- controlled natural gas monopoly and Exxon Mobil Corp. (XOM) over a multibillion- dollar, offshore energy venture.

“It will be wrong to say the Kremlin is somehow involved,” Dmitry Peskov, the Kremlin’s first deputy press attache, told journalists during a phone briefing. “Gazprom is a Russian company. Kremlin is the state. You have to divide Kremlin and Gazprom.”

Peskov was speaking ahead of a meeting between President George W. Bush and Putin that’s slated to begin Sunday at the Bush family’s oceanfront estate in Kennebunkport, Maine.

The relationship between OAO Gazprom (GSPBEX.RS) and Russia, which owns a majority stake in the gas monopoly, is a complicated one, and the extent of the Kremlin’s involvement in decisions made at Gazprom is murky.

Since Putin’s ascent, Russia has strengthened its grip on energy assets that were sold during the chaotic privatizations of the 1990s by putting them under the control of state-run countries. This trend of resource nationalism has been seen throughout the world and parallels rising oil prices, which have enriched oil-rich countries and upped their bargaining power.

Gazprom has been engaged in a war of words with ExxonMobil, the world’s largest publicly traded energy company by market capitalization and operator of the project, located off Russia’s Pacific coast and dubbed Sakhalin-1.

Earlier this week, Gazprom Deputy Chief Executive Dmitry Medvedev, who’s also been floated as a possible successor to Putin, said he wants some associated gas from Sakhalin-1 to be directed toward Russia’s domestic market in the Far East.

Sakhalin-1 plans to export all of its gas production to Japan via pipeline.

Royal Dutch Shell PLC (RDSB.LN) has already ceded control of its project in Sakhalin, known as Sakhalin-2, to Gazprom after incurring huge expenditure overruns that Russia said cost the government a delay in the receipt of its share of the revenue.

Last week, Russian Audit Chamber Chairman Sergei Stepashin said Russia won’t change the terms of the Sakhalin-1 contract. Both Sakhalin ventures are governed under an agreement inked in the early 1990s, when Russian was desperate to prop up its ailing oil sector. Russian politicians have said that the terms of these deals were too generous, robbing the state of money. The international energy majors involved counter that the agreements lowered the risks they were taking on in investment in these large projects.

Russian, Japanese and Indian companies are ExxonMobil’s partners in Sakhalin- 1.

Peskov on Thursday echoed Stepashin’s statement.

“All existing contracts are honored in Russia,” he said. “Shell sold to Gazprom based on market principles. It’s a commercial process. No one is violating the existing laws.”

-By Anna Raff, Dow Jones Newswires; 201-938-4426; [email protected]

  (END) Dow Jones Newswires
  06-28-07 1213ET
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