[Marxism] Imperialism?

Louis Proyect lnp3 at panix.com
Tue Jun 10 08:53:11 MDT 2014


"An instructive example of an attempt at such a redivision, of the 
struggle for redivision, is provided by the oil industry."

--V.I. Lenin, "Imperialism, the latest stage of capitalism"

NY Times, June 10 2014
For Western Oil Companies, Expanding in Russia Is a Dance Around Sanctions
By ANDREW E. KRAMER and STANLEY REED

MOSCOW — Like many chief executives of American companies, Rex W. 
Tillerson of Exxon Mobil didn’t attend the major business forum in 
Russia last month, at the urging of White House officials. But the 
company’s exploration chief, Neil W. Duffin, did.

In a ceremony at the event, Mr. Duffin signed an agreement with Igor I. 
Sechin, the head of the state-owned Rosneft, to expand its joint 
ventures to drill offshore in the Arctic Ocean, to explore for shale oil 
in Siberia and to cooperate on a liquefied natural gas plant in Vladivostok.

The deal came just weeks after the United States government imposed 
sanctions on the personal dealings — though not the corporate activities 
— of Mr. Sechin, a former military intelligence agent and longtime aide 
to President Vladimir V. Putin.

Despite the push by Western governments to isolate Moscow for its 
aggression in Ukraine, energy giants are deepening their relationships 
with companies here by striking deals and plowing more money into the 
country.

Along with Exxon, BP of Britain and Total of France also signed 
contracts at the business forum in St. Petersburg to explore for shale 
oil in Russia. Exxon plans to drill its first exploratory well offshore 
in the Russian sector of the Arctic Ocean this summer. Statoil of Norway 
is in talks for another shale joint venture. Royal Dutch Shell’s chief 
executive, Ben van Beurden, met with Mr. Putin in April and told him, 
“Now is the time to expand,” referring to a liquefied natural gas plant 
project.

The companies are taking a calculated risk, given the threat of further 
sanctions. But they also want to protect their long-term interests in 
Russia, the world’s largest energy-exporting nation.

“They are likely to continue to engage until there is a clear policy 
signal that they should stop. It is not rational to think they would act 
in any other way,” said David L. Goldwyn, who served as the State 
Department’s special envoy and coordinator for international energy 
affairs during President Obama’s first term. “If the government wants 
them to stop, it needs to say louder they should stop.”

Exxon declined to comment on the deal signed in St. Petersburg. Total 
and BP have emphasized that their agreements fully comply with sanctions.

So far, the United States and the European Union have imposed only 
limited sanctions, aimed largely at individual Russians and a handful of 
companies. The existing sanctions don’t explicitly bar the energy giants 
from operating in Russia. Though Mr. Obama authorized an executive order 
on March 20 that could outlaw such deals, it has not yet been put into 
effect by the Treasury Department.

The risk for energy companies is that the next stage of sanctions, 
called the third phase, will be broader, cutting off dealings with major 
sectors of the economy like finance, metals and energy. The United 
States and its allies proposed such sanctions at a Group of 7 summit 
meeting in Brussels last week, to be carried out if the violence in 
Ukraine did not subside within a month.

While the companies are not violating the current rules, they are 
walking a fine geopolitical line.

At the St. Petersburg gathering on May 24, the British oil giant BP 
signed a $300 million preliminary agreement with Rosneft to study shale 
oil deposits in the Volga Valley and Ural Mountains, west of the area 
where Exxon Mobil will be working. BP’s chief executive, Robert W. 
Dudley, an American citizen, attended the forum. But David Campbell, 
BP’s Russia chief and a British citizen, signed the agreement with Mr. 
Sechin.

Also at the business forum, Total signed a deal with Lukoil, another 
Russian oil company, for exploring more than 1,000 square miles of 
western Siberian wilderness for shale oil. “My message to Russia is 
simple — it is business as usual,” Total’s chief executive, Christophe 
de Margerie, told journalists there.

To keep it that way, oil companies are publicly and privately pushing 
back against more sanctions by speaking out at shareholders’ meetings 
and by lobbying in Washington.

“We have a responsibility to stand with our partners in a difficult 
time,” Mr. Dudley of BP told an audience at the St. Petersburg forum.

Mr. Tillerson, Exxon’s chief executive, told reporters last week in 
Dallas that the company was making its skepticism about sanctions clear 
to the United States government. “Our views are being heard at the 
highest levels,” he said.

“There has been no impact on any of our business activities in Russia to 
this point, nor has there been any discernible impact on the 
relationship” with Rosneft, he added.

The energy giants, in part, are wary of offending their partners in 
Russia. Several big Western companies have large existing investments 
and important joint ventures in Russia that they want to protect from a 
government that is sometimes seen as fickle on property rights.

Exxon has a wide-ranging relationship with Rosneft, including existing 
oil production off Sakhalin Island in eastern Russia. BP has a nearly 20 
percent stake in the Russian company. In all, Western energy companies 
have invested an estimated $35 billion in Russia.

The future opportunities could prove even more valuable.

The recent agreements signed by BP, Exxon and Total will help Russia 
push its petroleum industry into the high-tech field of extracting oil 
from shale. The big Western companies mostly arrived late to the shale 
boom in the United States as smaller companies took the lead, and 
Russia, which geologists estimate has the greatest potential for shale 
outside of the United States, represents a chance to gain an early edge. 
In the last few years, shale formations like the Bakken in North Dakota 
and the Eagle Ford in Texas have added three million barrels a day to 
the oil output of the United States.

Exxon is also gaining access to offshore drilling sites in the Russian 
Arctic Ocean, while the waters off Alaska remain tied up in lawsuits and 
regulation. Exxon and Rosneft plan to drill the first exploratory well 
this summer in the Kara Sea, one of the shallow extensions of the Arctic 
Ocean north of Russia, where there could be enormous oil and gas resources.

And Exxon is joining with Rosneft to explore the Bazhenov shale 
formation in western Siberia, an area that has already produced tens of 
billions of barrels of oil through conventional drilling methods — a 
good sign for shale drillers, according to geologists. “Compared to 
other opportunities worldwide, Russia is certainly one of the most 
promising,” said John Webb, an analyst at the market research firm IHS 
who specializes in Russian energy.

Rosneft welcomed the deals: Extracting oil from these types of reserves 
represents a technical challenge, the statement said. “That is why 
Rosneft teamed up with the best international companies like Exxon Mobil 
and Statoil for the scope of exploring and producing those resources.”

The energy giants, in a sense, are betting that the Russian oil and gas 
industry will not be hit by direct sanctions.

The energy industry provides financing for the Russian government and 
military, making sanctions a threat to continued action in Ukraine. But 
the United States and Europe must tread carefully, given the industry’s 
major role in world markets.

 From its swamps, tundra and wilderness, Russia pumps about the same 
volume of oil as Saudi Arabia, while exporting more energy than the 
desert kingdom, if oil and gas are counted together. Russia supplies 
about one-third of the gas to heat homes and generate electricity in 
Europe. And Russian oil and gas exports help ease energy reliance on the 
politically volatile Middle East.

For that reason, many analysts think Russian energy companies like 
Rosneft are simply too big to punish.

The companies are making “a hedged bet that the Russian energy sector 
will escape sanctions and the Ukraine crisis will quiet down,” said 
Cliff Kupchan, a Russia analyst at the Eurasia Group.



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