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Associated Press: Top U.S. Economic Adviser Encourages Russia to Spur Foreign Investment in Challenging Fields

Alex Nicholson
July 18, 2007

MOSCOW (AP) – A top adviser on foreign economic policy to U.S. Secretary of State Condoleezza Rice encouraged Russia on Wednesday to give foreign companies a bigger role in developing its vast but remote oil and gas reserves in the Arctic and Eastern Siberia.

Reuben Jeffery III called Russia a “key player in the global energy equation,” noting that Russian supplies were “critical to global energy security.”

He was speaking on his first official trip overseas since taking up the post of U.S. undersecretary of state for economic, energy and agricultural affairs in June.

Russia, the biggest producer and exporter of gas in the world and the second largest oil exporter after Saudi Arabia, has been reasserting its control over the sector and limiting the role of foreign investors.

Technologically challenging fields in Eastern Siberia and the Arctic that industry experts say will require tens of billions of dollars to develop are crucial to meeting increased demand in the future, Jeffery said. He suggested that a bigger role for foreign investors would accelerate the process of bringing them online.

Under the Kremlin’s unwritten industrial policy, foreign companies are allowed no more than a minority role in major deposits of oil, gas and minerals. Earlier in the summer, state gas monopoly OAO Gazprom bought BP PLC’s Russian joint venture out of a major Siberian gas field and acquired control of a formerly Royal Dutch Shell PLC-run venture off the Pacific Coast in December.

France’s Total SA, which once held an option for a controlling stake in the Vankor field in East Siberia, lost that toehold after state-controlled OAO Rosneft bought the company that originally sold Total the option and declared that it did not want to work with the French company. Total challenged the move in an international arbitration court in Brussels, but lost the case.

“There have been some limitations on foreign partnerships, however, so it’s not altogether clear how this challenge will be met,” Jeffery told an audience of businessmen. “Russia could benefit greatly by facilitating partnerships with large multinational oil and gas companies on mutually advantageous, competitive economic terms. That is a win-win prospect for all parties involved,” he said.

At the same time Jeffery welcomed a decision last week by Gazprom to partner with Total at the Arctic offshore field Shtokman, which could become a future source of liquefied natural gas for North America.

U.S.-based ConocoPhillips has also been in talks on joining Shtokman, as well as Norway’s Statoil ASA and Norsk Hydro ASA.

Separately, he expressed hope that a bill currently in the works defining the role of foreigners in strategic sectors of Russia’s economy would be “shaped in a way that keeps Russia’s economy open and competitive.”

He noted that equivalent legislation on foreign investment had never been used to block Russian acquisitions or deals in the United States.

Addressing claims that Russia has used its energy resources as a political tool, Jeffery urged Russian companies to avoid politically charged price disputes.

“We urge that moves toward market prices be gradual so as not to upset the economies of Russia’s friends and neighbors. In our interconnected global economy it is vital that major companies managing important resources are seen to be acting for valid commercial purposes and not as instruments of politics.”

Russia’s decisions in recent years to raise the price of gas for Ukraine and the oil transit fees paid by Belarus led to temporary supply disruptions to Europe. and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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