Chevron, Exxon Will Have to Blink Against Russia

Chevron and Exxon Mobil so far have suggested that they have a lot of leverage with Russia. But next week they will be tested when they meet Transneft for the first time since the pipeline company took control of Moscow's interest in the 1,000-mile oil pipeline from Kazakhstan's giant Tengiz oilfield to the Black Sea.

The stakes are these: the two American oil companies want finally to get Russia to fulfill its more than decade-old promise to allow full export of Tengiz's oil (meaning 700,000 barrels a day and more). Transneft wants the companies to pay a lot more in per-barrel tariffs for shipping the oil across Russian territory and, more important, to tie the shipments to a geopolitically driven, Russian-controlled pipeline spoke through Bulgaria and Greece; Russia sees the proposed Burgas-Alexandroupolis pipeline as a way to undercut the U.S.-supported Baku-Ceyhan oil pipeline, which bypasses Russian territory and began shipments last year.

The upshot: Chevron and Exxon Mobil will have to compromise. Transneft has all the upside and little downside in forcing the companies to continue paying expensive barge and rail costs to ship their extra oil, while the multinationals -- especially Chevron -- are under pressure to unlock Tengiz and its contribution toward their oil production.

Gazprom Gains BP Gas Field as Putin Tightens Control

June 22 (Bloomberg) -- OAO Gazprom took control of BP Plc's stake in a Siberian deposit with enough natural gas to supply Asia for five years as President Vladimir Putin ends foreign ownership of Russia's biggest energy assets.

State-run Gazprom will pay as much as $900 million for the 63 percent of the Kovykta field held by BP's TNK-BP unit and half its regional pipeline unit, and agreed to set up a $3 billion global venture, executives from the three companies said in the Kremlin today.

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From Steve: The once full-throated multinational oil companies, knocked onto their heels in Russia, ought to be worried about Kazakhstan and Azerbaijan, which certainly are watching these events with interest.

4 Leaders Try to Offset Russia's Clout

BAKU, Azerbaijan (AP) – Leaders of four former Soviet republics discussed ways to counterbalance Russia's wide influence in the Caspian and Black Sea basins at a summit of their regional grouping.

The summit is the first for the organization, called GUAM, the Organization for Democracy and Economic Development, since its four member countries – Georgia, Ukraine, Azerbaijan and Moldova – agreed last year to deepen ties and cooperation.
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From Steve: On the other side of the Caspian, Kazakhstan and Turkmenistan still have no concrete link into the Baku-based oil-and-natural gas pipelines to the Mediterranean.

Instead they recently agreed to build another natural gas pipeline through Russia. To the degree that they are seeking leverage against Russian influence of their energy markets, they are doing so by building up transportation with China, and organizing barge traffic to Baku.

But one wonders if this will be sufficient for their long-term economic independence.

Possibility of Rakhat Aliyev's Extradition

VIENNA, Austria, Jun. 2, 2007 (AP) The son-in-law of Kazakhstan's autocratic president has appealed to Austrian authorities not to extradite him to his homeland to face kidnapping charges, a magazine reported Saturday. Read the rest of the story

From Steve: The key question in the blockbuster news in Kazakhstan over the last several weeks is what pushed President Nursultan Nazarbayev to take such extreme measures: freeing himself to be president for life, and ordering the arrest of his son-in-law?

Both steps seriously diverge from Nazarbayev's long-crafted image as a global-level statesman. The events closely track his 2001 crackdown against both son-in-law Rakhat Aliyev and the country's young liberals; at that time Nazarbayev was convinced that Aliyev had launched a grave political plot against him.

It seems probable that this is the case now as well -- Nazarbayev became persuaded that Aliyev was mounting a worrisome challenge to his leadership, and decided to do away with his elder daughter's nettlesome husband once and for all.

Whatever the case, Nazarbayev's actions have required him to publicly bare his fangs, something he has never done in his 17 years of leadership. The events ask for a strong Western reconsideration of its foreign policy framework toward this oil-rich state.