- The Washington Times - Wednesday, May 4, 2005

American energy firms are losing out to more aggressive East Asian rivals in the scramble to lock up Russia’s vast Far East oil and gas deposits, a leading Kremlin energy adviser said yesterday.

Gen. Vladimir Danilov told a Capitol Hill forum that U.S. interests were at a sharp disadvantage competing with China and Japan, even though many private-sector firms in Russia have lobbied for pipelines and development projects with American investors.

“The United States has adopted a passive position on these markets, but we’ve seen a flurry of activity by East Asian countries on cooperation deals,” said Gen. Danilov, speaking through an interpreter.

He said Russian government officials favor the Chinese and Japanese offers, because the governments are willing to accept a higher political risk and guarantee financing of the deals.

Russia is the world’s second largest exporter of oil after Saudi Arabia and has the largest reserves of natural gas.

Despite repeated pledges by U.S. and Russian leaders to boost bilateral energy ties, conflicts have overshadowed cooperation, said Vladimir Milov, a former deputy energy minister under President Vladimir Putin and now president of the Moscow-based Institute of Energy Policy.

Moscow has opposed U.S.-backed private pipeline projects bypassing Russia in the Caspian Sea region and southeastern Europe, notably a pipeline crossing Azerbaijan, Georgia and Turkey.

“I wouldn’t expect any massive exports of natural gas from Russia to the United States in the near future,” Mr. Milov said.

Gen. Danilov said the negative publicity surrounding Russia’s prosecution of Yukos Oil founder Mikhail Khodorkovsky, a rival to Mr. Putin, had played a role in discouraging U.S. investment in Russian energy projects.

“We are all looking at better cooperation, but so far we have not seen practical, concrete results,” he said.

Russian Prime Minister Mikhail Fradkov in December approved the route for a $10 billion trans-Siberian pipeline to the port of Nakhodka, a prime shipping point for the Japanese market.

But Russian economist Mikhail Berger this week said officials at Rosneft, the company that acquired Mr. Khodorkovsky’s natural gas subsidiary, still hopes to build a pipeline directly to the booming Chinese market.

Senior Japanese and Chinese delegations have met with their Russian counterparts in recent weeks in a bid to sway the pipeline decision.

Separately, Swiss authorities yesterday said they had arrested Russia’s former nuclear energy minister after a U.S. court accused him of defrauding American aid programs intended to improve safety at Russian nuclear facilities.

Yevgeny Adamov, a nuclear physicist, was arrested in Bern on Monday during a visit to Switzerland.

The U.S. warrant accuses Mr. Adamov of diverting up to $9 million that the U.S. Energy Department provided Russia and investing the money in various projects, including U.S. firms that he controls.

This article is based in part on wire service reports.

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