The West’s major oil companies have been seamlessly sidestepping sanctions imposed on Russia by the U.S. and European Union, for the most part pressing full speed ahead on joint ventures to drill for oil and gas with sanctioned Russian companies and executives.
Russia remains the world’s top energy producer, despite the sanctions and an economic spiral into recession this year. Because Russia it is such an important player and fossil fuels remain in heavy demand worldwide, much is at stake for Exxon Mobil Corp., BP PLC, and other Western oil giants. They have invested billions of dollars into Russia with hopes of developing some of the world’s biggest and most promising oil and gas fields in the nation’s vast Siberian and Arctic wilderness areas.
Until recently, the joint U.S.-EU sanctions did not appear to be aimed at crimping Russia’s vital energy activities, which benefit Europe and much of the rest of the world as much as they do Russia, although they do not directly affect the U.S. so much.
The careful crafting of the sanctions to avoid major damage to the energy industry had the effect of encouraging oil firms to continue openly associating with sanctioned firms such as OAO Rosneft Oil Co. and their sanctioned executives, prompting Rosneft’s chief executive to declare recently that it was “business as usual” for the energy sector.
Western energy firms even defied U.S. and European efforts to isolate Russian President Vladimir Putin, egging on his ambitions to embellish Russia’s status as an energy superpower and providing cover for him at an international economic forum he sponsored in St. Petersburg in June.
“We have responsibility to stand with our partners in difficult times,” Bob Dudley, chief executive of British oil giant BP, said after announcing a deal with Rosneft to jointly explore for shale oil in the Volga-Urals region of central Russia.
He added at the forum that he is “pleased to be part of the Russian energy complex,” Reuters reported.
BP has the strongest ties with Russia of any Western energy company, venturing into the federation early after the end of the Cold War and taking a 20 percent stake in Rosneft, Russia’s state-directed oil company.
But Exxon, the American oil firm with the biggest stakes in Russia, may be even closer to Mr. Putin’s heart. Exxon CEO Rex Tillerson has cultivated close ties with the Russian leader in what Forbes magazine has dubbed a Russian “bromance.”
On Monday, Mr. Putin hailed Exxon as his “old and reliable partner” as he gave his assent for Exxon in partnership with Rosneft to begin drilling Russia’s northernmost oil well in the Arctic Ocean.
“Despite current political difficulties, pragmatism and common sense prevail,” Mr. Putin said in a video from the Black Sea resort of Sochi. “Nowadays, commercial success is defined by an efficient international cooperation. Businesses, including the largest domestic and foreign companies, understand this perfectly.”
Mr. Dudley sought to explain Russia’s draw to reporters last week. “Russia is the largest oil- and gas-producing country on the planet, and the world is going to need 40 percent more energy between now and 2035. That’s why you can see many, many, many international companies working in Russia. Obviously, BP is among them.”
Mr. Dudley noted at the economic forum that Russia is one of the last frontiers for oil and gas exploration and is the only country with the potential to produce more shale oil than the U.S.
BP pulled back some on its glowing outlook after the most recent round of sanctions were announced last week, with provisions aimed at stifling further investment in oil and gas exploration or sales of sophisticated Western drilling technology to Russia.