Although Russia is a comparatively minor feeder of the US' giant hunger for petroleum, concern over Russia's oil industry is one of the main items on the agenda for this week's summit between presidents Vladimir Putin and George W. Bush.
Turmoil over the breakup of Russia's largest oil company Yukos has raised worries that the nation's production could decline -- driving up already-high world oil prices -- and sparked questions about the rule of law, property rights and taxation policies. New restrictions on foreign bidding for the nation's biggest oil and gas deposits deepened the unease for US oil companies looking to invest in projects to extract Russia's massive reserves.
Russia provided only about 1.9 percent of the US' crude oil imports as of December, according to the US Department of Energy, but its vast untapped reserves and its contribution to the world oil supply make upheaval in Russia's energy sector a significant issue for Washington.
Yukos Chief Executive Steven Theede told a US Senate committee last week that the destruction of Yukos and the jailing of its founder Mikhail Khodorkovsky directly endanger America's energy security. The strength of the US economy depends largely on the stability and reliability of global oil supplies to maintain it, he said.
Bush, in an interview with the ITAR-Tass news agency, said of the oil issue: "The dialogue is `You've got a lot of it and we don't have much' ... But Russia has to make up her mind as to whether or not she wants to attract outside capital, which is really what the energy dialogue is about."
Under Khodorkovsky, Yukos brought in Western-style production and management know-how that helped turn it into a major engine of Russia's soaring oil production. His jailing and the dismantling of Yukos because of massive tax bills -- widely seen as Kremlin punishment for Khodorkovsky's political activities -- led to worries over production.
Yukos' output quadrupled from 2000 to 2003, while total Russian output increased by only 30 percent over the same period, Theede said.
"If Russia had not massively surprised with this very strong resurgence of oil production growth, imagine where world oil prices would be today," said Paul Collison, oil and gas analyst at the Brunswick UBS brokerage in Moscow.
"They completely dominated the non-OPEC supply increases in the world and if there is any sense of that factor diminishing, then I think that worries Western policy-makers a lot," he said.
Fourteen months after his arrest, Khodorkovsky's trial drags on. Meanwhile Yukos' 1-million-barrel-per-day subsidiary Yuganskneftegaz was auctioned off by the state in December against the parent company's US$28 billion bill for back taxes.
Yuganskneftegaz was eventually bought by the state-owned oil company Rosneft, and market watchers fear its new owners will be unable to run it as efficiently as Yukos had.
Yukos' value has plummeted from about US$40 billion at its peak to just US$2 billion since the sale. Yukos estimates that US investors lost nearly US$6 billion in the collapse.
Though oil production itself is still increasing, output growth has been dwindling. By next year, it will have fallen from 10.9 percent in 2003 to 4.7 percent, according to Brunswick UBS estimates. Though still impressive, the figures mark a worrying trend.
Fears generated by the Yukos bills as well as overall tax increases in the sector have made major oil companies cut back their investments. Capacity restrictions at the state pipeline monopoly Transneft have also had an impact.
Now, as the world's oil importers look for sources away from the turbulent Middle East, there is a feeling that Western investors in Russia's oil sector are not as welcome as they once were.
Last week, Natural Resources Minister Yuri Trutnev announced that Russia's biggest oil and gas deposits were no longer for sale to foreign-controlled companies. That could make foreign companies less willing to pump big money into projects they do not control, possibly delaying the exploration of giant new fields in the Russian Arctic, Far East and around the Far Eastern island of Sakhalin.
Sergei Karaganov of the Foreign and Defense Policy Council think tank said the developments severely eroded any prospect of progress on energy issues at this week's Bush-Putin summit in Bratislava, Slovakia.
Japan has deployed long-range missiles in a southwestern region near China, the Japanese defense minister said yesterday, at a time when ties with Beijing are at their lowest in recent years. The missiles were installed in Kumamoto in the southern region of Kyushu, as Japan is attempting to shore up its military capacity as China steps up naval activity in the East China Sea. “Standoff defense capabilities enable us to counter the threat of enemy forces attempting to invade our country ... while ensuring the safety of our personnel,” Japanese Minister of Defense Shinjiro Koizumi said. “This is an extremely important initiative for
MORE POPULAR: Taiwan Pass sales increased by 59 percent during the first quarter compared with the same period last year, the Tourism Administration said The Tourism Administration yesterday said that it has streamlined the Taiwan Pass, with two versions available for purchase beginning today. The tourism agency has made the pass available to international tourists since 2024, allowing them to access the high-speed rail, Taiwan Railway Corp services, four MRT systems and four Taiwan Tourist Shuttles. Previously, five types of Taiwan Pass were available, but some tourists have said that the offerings were too complicated. The agency said only two types of Taiwan Pass would be available, starting from a three-day pass with the high-speed rail and a three-day pass with Taiwan Railway Corp. The former costs NT$2,800
POLLS CONCERNS: There are concerns within the KMT that a Cheng Li-wun-Xi Jinping meeting could trigger a voter backlash in elections in November Chinese Nationalist Party (KMT) Chairwoman Cheng Li-wun (鄭麗文) accepted an invitation from Chinese President Xi Jinping (習近平) to visit next month, her party and Chinese state media reported yesterday. Cheng, who took up her role in November last year, “gladly accepted” the invitation to lead a delegation to China, the KMT said in a statement, confirming a Xinhua news agency report. Cheng “looks forward to joint efforts by both parties to advance the peaceful development of cross-strait relations, promote cross-strait exchanges and cooperation, and work for peace in the Taiwan Strait and greater well-being for people on both sides,” the statement said. Chinese
SIGNIFICANT TO THE WORLD: The delegation’s visit aims to send a clear message that bipartisan support for Taiwan is consistent, US Senator Jeanne Shaheen said The US Senate’s bipartisan support for Taiwan remains strong and Taiwan-US ties would continue for decades to come, a US Senate delegation said in Taipei yesterday, while calling on the legislature to swiftly pass a special defense budget bill. A US delegation led by Democratic US Senator Jeanne Shaheen and Republican US Senator John Curtis — both members of the US Senate Committee on Foreign Relations — arrived in Taiwan yesterday for a two-day visit. The other senators of the delegation included Senate Taiwan Caucus cochair Thom Tillis and Senate Committee on Armed Services senior member Jacky Rosen. Shaheen told a news
RSS