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Kremlin 'Bullying' Leaves Western Energy Companies Furious
The Telegraph (UK) ^ | 9-23-2006 | Adrian Blomfield

Posted on 09/22/2006 6:04:17 PM PDT by blam

Kremlin 'bullying' leaves western energy companies furious

By Adrian Blomfield in Moscow

(Filed: 23/09/2006)

In the past few years, mention of Vladimir Putin at the dinner table of some western leaders could have brought on a case of indigestion. In the past week, though, the Russian president has been causing ulcers.

Sakhalin Energy extracts oil and gas from one of the world's most inhospitable regions

On Monday, Russia suspended an environmental permit for an oil and gas project led by Royal Dutch Shell on Sakhalin Island in the Pacific Ocean.

The international community has watched with queasiness as democracy in Russia has gone on the retreat and Kremlin assertiveness — neighbours might call it bullying — has grown.

But the move against Shell seemed to have confirmed the West's worst fears about Russia's trajectory: not only does the Kremlin seem intent on taking direct control of a vast and possibly dangerous energy empire, it seems prepared to do so by riding roughshod over some of the world's most powerful multinationals.

There was fury in Europe, where memories of a gas crisis last winter — caused when Russia halted supplies to neighbouring Ukraine — are still fresh.

Already strained relations between London and Moscow have deteriorated further. The Foreign Secretary met her Russian counterpart in New York and delivered a stern protest, while the Prime Minister's office has taken the matter up with the Kremlin directly. It is not hard to understand the consternation. Europe depends on its giant neighbour to the east for a quarter of its energy needs and suspicions are growing that Russia is prepared to use energy to gain political leverage over the West.

The latest crisis, though it will not directly affect supplies to Europe, is an unwelcome and dramatic escalation — not least because it again seemed to demonstrate the Kremlin's indifference to property rights.

"Any delay to this project will have a serious impact on global energy security," said a western diplomat. "Russia's behaviour, if it doesn't stop, will be hugely damaging to its reputation and for its future economic development."

The row between the Kremlin and Sakhalin Energy, a consortium led by Shell but which also includes two Japanese companies, has been brewing for some time.

Development of the project began in 1993, when the government of Boris Yeltsin signed a production sharing agreement (PSA) with Sakhalin Energy to extract oil and gas from one of the world's most inhospitable regions.

Then Russia was poor and desperately in need of foreign investment and the government quickly agreed to terms that meant the state would not recover revenues until the initial costs had been recovered.

Gazprom has been in negotiations to take 25 per cent of Sakhalin Energy in a share swap. Now it says — ostensibly because of the rising costs — it wants more.

Diplomats say the environment issues raised by the state are merely a pretext. After all heavily polluted Russia is not considered to be too hot on ecological issues, while one of the main reasons for the spiralling costs has been due to the rerouting of pipelines over rivers in Sakhalin and round a spawning ground for the endangered grey whale.

"There is an environmental problem, but it is not the main one," said Sergei Markov, a Kremlin environment consultant. "There are Gazprom interests but that is not the only reason. The main issue is that the Sakhalin projects were signed away by an absolutely corrupt and pauper government. They are against Russian interests and should be terminated."

Accused of greed by many Russians, Shell has defended its decision not to renegotiate its PSA with the government.

"The Russian party's share of profit from tax and royalties over the life of the project is estimated at $50 billion (£26 bn)," said Ivan Chernyakhovskiy, spokesman for Sakhalin Enegry. Moreover there are immediate benefits such as the cash flow to Sakhalin and the creation of an 18,000-strong labour force."

Government critics argue that the expropriation of foreign oil major concerns is likely to do no favours for Russia. Jobs will be lost, the resurrection of Sakhalin will be costly and time-consuming and profits are likely to be less substantial because Gazprom is so opaque and unwieldy.

It is Gazprom, referred to by many Russians as Kremlin Inc, which the West really fears. If it were a country, only Saudi Arabia and Iran would have larger reserves and there can be fewer companies so totally dominated by powerful politicians. Its chairman is Russia's deputy prime minister.

It has long been rumoured that Mr Putin wants to take over as chairman of the company when he steps down in 2008.

Mr Putin has already stuffed Gazprom with his friends, including former German chancellor Gerhard Schroeder who runs a Gazprom subsidiary. If there is truth in the rumour, Mr Putin, would head not just a vastly wealth company but would continue to wield huge power over both the West, whose energy dependence on Russia is set to double over the coming decades, but also over large parts of Asia.

Mr Markov however said: "Putin as head of Gazprom — you must be kidding," he said. "Gazprom is too small for him."


TOPICS: News/Current Events
KEYWORDS: bullying; cccp; coldwar2; companies; energy; furious; gas; gasputin; kgb; kremlin; leaves; oil; putin; russia; sakhalin; shell; soviets; sovietunion; vladimir; western

1 posted on 09/22/2006 6:04:19 PM PDT by blam
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To: blam

Western countries have been doing the discovering for years. In Saudi,Kuwait, Iraq , Russia, Now in Venezuela,Mexico, Western Countries, the United states and others have found oil drilled for it only to have it takenaway by the host country.

Let these countries scratch for their own oil.


2 posted on 09/22/2006 6:08:41 PM PDT by sgtbono2002 (The fourth estate is a fifth column.)
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To: blam

Does anyone really still believe the the Soviet system "collapsed"?


3 posted on 09/22/2006 6:12:12 PM PDT by frankiep (I respect Islamofacists more than the American left - at least they ADMIT that they hate the US.)
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To: sgtbono2002

They should blow up the wells and drilling rigs before they go.


4 posted on 09/22/2006 6:13:07 PM PDT by Blood of Tyrants (G-d is not a Republican. But Satan is definitely a Democrat.)
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To: Blood of Tyrants
Rule Number 1

Never trust the Russians or any Middle Eastern country.

5 posted on 09/22/2006 6:29:57 PM PDT by Orange1998
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To: lizol; Lukasz; strategofr; GSlob; spanalot; Thunder90; Tailgunner Joe; propertius; REactor; ...
Russia/Soviet/Coldwar2 PING!!!

To be added or removed from this list, please FReepmail me!!!

6 posted on 09/22/2006 6:47:50 PM PDT by Thunder90
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To: Blood of Tyrants

You get my vote on that one.


7 posted on 09/22/2006 6:50:18 PM PDT by sgtbono2002 (The fourth estate is a fifth column.)
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To: Orange1998
rasPutin practicing Lenin's NEP program? Let the western fools build factories, kick them out, nationalize it and run it (to ground).
8 posted on 09/22/2006 6:50:24 PM PDT by Leo Carpathian (ffffFReeeePeee!)
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To: blam

I wrote a research paper on this issue (primarily energy security with regard to natural gas) in 1981. I keep being reminded to dig it out.


9 posted on 09/22/2006 6:54:33 PM PDT by 1rudeboy
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To: Blood of Tyrants
They should blow up the wells and drilling rigs before they go.

Yes. I hope they do just that.

10 posted on 09/22/2006 6:56:02 PM PDT by Jorge
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To: blam

Blackmail.


11 posted on 09/22/2006 7:06:06 PM PDT by Eric in the Ozarks (BTUs are my Beat.)
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To: blam

Texaco almost fell into this trap 20 years ago. They were smart not to JV with the Russians.


12 posted on 09/22/2006 7:51:49 PM PDT by Cobra64 (All we get are lame ideas from Republicans and lame criticism from dems about those lame ideas.)
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To: blam
Prince Yamini of Saudi Aribia said five years ago, "The end of the stone age did not happen because of the lack of stones and soon the oil age will end." Putin forgets that oil goes up and down based upon markets. If he makes the market a mess then the world will build more hybrids and Nuke power stations. His oil will stay in the ground.

Here in dallas a company has developed a roof mounted wind turbine to put electric power in homes and offices. In ten years some of our electric plants will be doing less and we'll be shipping power out of the state. Then we will ship this technology to England and replace the 25% of the power Putin wants for his control of Europe. Never mess with the Anglo American partnership.

13 posted on 09/22/2006 9:00:07 PM PDT by q_an_a
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To: blam
...and round a spawning ground for the endangered grey whale.

Whales spawn? NOT!

14 posted on 09/22/2006 9:08:09 PM PDT by Smokin' Joe (How often God must weep at humans' folly.)
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To: blam

Guess this makes dealing with the Alaska State Government a little easier to take, 'eh?

Drill ANWR!


15 posted on 09/23/2006 12:27:40 AM PDT by ASOC (The phrase "What if" or "If only" are for children.)
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To: blam
"In the past few years, mention of Vladimir Putin at the dinner table of some western leaders could have brought on a case of indigestion."

While on the hand there remains a small cabal of arch Putin promoters on FR, who keep attacking everyone stating the obvious expanding dangers the Putin Kremlin continues demonstrating to the West. Why are these Moscow mouth pieces allowed to contaminate this forum with their non-stop pro-Russian propaganda?

16 posted on 09/23/2006 12:47:11 AM PDT by M. Espinola (Freedom is not free)
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To: M. Espinola

Why are these Moscow mouth pieces allowed to contaminate this forum with their non-stop pro-Russian propaganda?

Because this website is called "Free" Republic, not stifled speech. Refute their arguments with facts, rather than trying to shut down their points of view. It works, at least to the rest of the Freepers reading your facts as opposed to their fantasy.


17 posted on 09/23/2006 12:56:33 AM PDT by flaglady47 ( thinking out loud)
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To: flaglady47
Well stated excellent point.
18 posted on 09/23/2006 1:08:29 AM PDT by M. Espinola (Freedom is not free)
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To: lizol

ping


19 posted on 09/23/2006 5:25:35 AM PDT by 1rudeboy
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To: M. Espinola

Think of them as forum mascots.


20 posted on 09/23/2006 5:26:06 AM PDT by 1rudeboy
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To: blam

Russia/China and chavez all use the same tactics. Have superior western tech and investment find the oil then steal the project under"nationilization"(theft). They are the enemey and the global market can not continue as it is with this behavior.


21 posted on 09/23/2006 7:05:37 AM PDT by MARKUSPRIME
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To: MARKUSPRIME

Precisely. Red China does the exact same thing. Reminds me of Lenin's NEP policy (on steroids)


22 posted on 09/23/2006 7:11:30 AM PDT by GodGunsGuts
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To: Romanov; GarySpFc

Here's a tough row to hoe!


23 posted on 09/23/2006 9:09:37 AM PDT by spanalot
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To: 1rudeboy
"Think of them as forum mascots."

Each time Putin's pet parrots issue their worn out propaganda on FR the truth is always forth coming, shooting holes right through their disinformation.


24 posted on 09/23/2006 12:36:03 PM PDT by M. Espinola (Freedom is not free)
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To: M. Espinola

Where's the chorus?

With oil heading to the $40's , Putie might be doing some downsizing.

http://www.freerepublic.com/focus/user-posts?id=203218


25 posted on 09/25/2006 7:23:51 AM PDT by spanalot
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To: spanalot
Col Putin's Kremlin might very well have to cut back on their overseas Russian Public Relations Department, i.e. Disinformation Division targeting those 'stupid Americans'.

The cut backs also include all those paid vacations on Russkie Airlines.

26 posted on 09/25/2006 9:44:44 AM PDT by M. Espinola (Freedom is not free)
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To: M. Espinola

HA!!

Indeed, Puties bottom line has taken a BIG hit in the last few months.


27 posted on 09/26/2006 1:44:52 PM PDT by spanalot
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To: Cobra64

Citgo is in it with the Russians...


28 posted on 09/29/2006 1:54:13 PM PDT by Thunder90
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