Russian Dreams Of Oil Empire Fades With Iraq Fall

by Sergei Blagov

A draft plan that was a year in the making had projected that by 2020 Russia would produce 450 to 520 million tonnes of crude a year. Production last year was 379 million tonnes, nine percent higher than 2001.

With domestic consumption expected to remain stable, much of the new production was intended for export, with the U.S. as the big buyer.

U.S. President George W. Bush and Russian President Vladimir Putin signed a joint declaration on energy cooperation at their summit in Moscow May 24 last year. At an "energy summit" that followed in Houston in October, Russian officials said they could export as much as a million barrels a day to the U.S. within five years.

Russia's state-owned Rosneft oil company and the U.S. firm Marathon Oil Corporation announced a joint venture project UNAM (Urals North American Marketing) to supply oil from the Urals region in Russia to the U.S.

Supply of oil under this project was due to begin later this year, but it is now far from certain whether this plan will materialize. "Rosneft and Marathon continue to discuss the UNAM project," Rosneft spokesman Dmitry Panteleyev told IPS. But he said that the project now depends on "a number of factors."

Russian plans to increase oil export to the U.S. are beginning to look unrealistic. Deputy foreign minister Andrei Denisov told media representatives at a press conference in Moscow this week that Russia is rethinking its energy strategy following the war on Iraq.

Strong differences have surfaced between the U.S. and Russia over Iraqi oil. U.S. Secretary of State Colin Powell failed to convince Putin this week to support proposals to lift the United Nations sanctions against Iraq. Russia has been reluctant to give the U.S. powers to sell oil and spend the revenue from it without international supervision.

Russian and U.S. oil firms are also heading towards conflict. Robert Ebel, a top U.S. energy expert said last month that Russian companies had little hope of going ahead with contracts signed with the previous regime in Iraq.

The Russian firm LUKoil has threatened to move an international tribunal in Geneva if its contracts are blocked. LUKoil signed a contract in 1997 to develop the West Qurna oilfield in Iraq with an investment of four billion dollars by 2020.

The Russian oil industry is now making moves towards OPEC (Organization of Petroleum Exporting Countries) whose membership it has shunned so far. Russian officials are worried that the price of their crude will fall if the market is flooded with Iraqi oil.

At a news conference Wednesday at the end of Qatar oil minister and OPEC president Adbullah al-Attiyah's visit to Russia, Energy Minister Igor Yusufov said Russia was prepared to join other oil-producing nations in cutting exports if prices dropped. He said Russia supports a price range of $20 to $25 a barrel.

Russia has promised before to cut exports to help OPEC support oil prices, but rarely kept its pledges. The situation Russia faces now is more difficult, and it is expected to be more conciliatory towards OPEC.

Al-Attiyah said OPEC wants Russia to become a full member of OPEC. That possibility is "open to negotiations," Yusufov said. Russia accepted OPEC's invitation to attend its next meeting in Qatar June 11 as an observer.