Aboutface
The Russian government has until recently been content to allow foreign investment in Russian strategic industries as long as Russian entities maintain control. With the Shtokman decision -- Gazprom would have taken a 51 percent share of any venture -- this appears to have changed. Why?
The first reason is the one given by Miller: that Gazprom and the Westerners could not agree terms. Despite its huge reserves, Gazprom needs capital and expertise to exploit them.
According to Moscow-based Deutsche Bank/UFG, production from existing fields will fall from today's level of about 600 billion cubic meters to some 140 billion cubic meters in 2020, which means that opening up fields like Shtokman and Kovykta is crucial.
In the past, with a low oil and gas price, Russia has signed deals (such as Sakhalin) it now believes are disadvantageous. With today's high prices, the balance may have swung too far the other way.
"Foreign companies may have concluded that the political, technical and financial risks involved in the project were such that they could not offer Gazprom what it wanted to bring them on board as partners," Stephen O'Sullivan of Deutsche Bank/UFG said.
But, he added: "This was a political decision, along the same theme as with Sakhalin and Kovykta."
"Moscow has become tired of US criticism over a range of issues, most recently Russia's attitude to Georgia. Another was the US refusal to admit Russia to the World Trade Organization at the July G8 summit," Weafer said.
Meanwhile, as relations with the US sour, those with its Western neighbor Germany warm. Putin met Angela Merkel last week. Analysts sense this may explain the timing of Miller's announcement, which was greeted with enthusiasm by Burckhard Bergmann, chairman of E.ON subsidiary Ruhrgas. "Gazprom's decision is good for the supply of gas to Europe because it improves the production base," he said.
Such enthusiasm is unsurprising -- Bergmann is also a board member of Gazprom. Gazprom's plan was to allow access to reserves in return for access to Western markets. But Miller's hint that he would like to take a stake in Centrica, owner of British Gas, earlier this year was greeted with barely disguised hostility by UK ministers, who last week reiterated that such a move would be examined on national interest grounds.
And after one of Russia's state banks bought a 5 percent stake in European aerospace champion EADS, Putin's requests for a Russian seat on the board were rebuffed. Analysts say there are indications that Putin's attempts to balance liberal reformers in his administration, who include Medvedev and Gref, with "hardliners" may be suffering a reactionary backlash.
Security links
Experts point to the influence of Igor Sechin, chairman of state-controlled oil group Rosneft, deputy head of Putin's administration, and one of a group known as the "Siloviki" with close links to the security services.
There are discussions about restructuring BP's joint-venture with Russian group TNK, which hopes to develop Kovykta. Here, Gazprom would like to buy out the three oligarchs who currently own TNK, but it will have to fight off Rosneft. Meanwhile, it is seeking to improve terms for entry into the Sakhalin-2 project -- Rosneft is already involved -- in an agreement that was made with Shell last year to swap assets it has on the mainland for a stake.
RSS