- The Washington Times - Friday, February 7, 2003

One of Russia's top oil executives said yesterday that his country wants an equal stake in Iraq's oil market and that its petroleum industry is stable enough to withstand a drop in oil prices that could come after a war in Iraq.
"We are hoping that after all of this ends the Americans are not going to take everything for themselves," Mikhail Khodorkovsky, chairman and chief executive of Yukos Oil Co., Russia's second-largest oil and gas company, told editors and reporters at The Washington Times.
Yukos would "be very happy" if the United States delayed any military operation "for another two years," he said. "A price of $30 per barrel is real nice. But we know that all good things must come to an end. The Russian oil industry is basically ready for the next period of when oil prices are going to be lower."
Mr. Khodorkovsky's comments come as Russia is flexing new economic muscle as the world's second-leading producer of oil, after Saudi Arabia. Russia currently produces about 7 million barrels of oil a day for the world market, and Mr. Khodorkovsky said that Russia could be producing more if it improved its oil transportation network.
Crude oil prices are at two-year highs amid heightened uncertainty about a U.S.-led invasion of Iraq. Crude oil prices for spot delivery yesterday rose 23 cents to $34.16 per barrel on the New York Mercantile Exchange. Some oil industry analysts say a swift and successful war with Iraq would cause oil prices to tumble.
Strong oil prices in recent years have helped to revive Russia's oil industry, which was left in disarray for several years after the collapse of the Soviet Union.
Internal reforms of Russian oil companies and national tax laws, coupled with increased production, have swiftly turned Russian oil executives like Mr. Khodorkovsky, 40, into Western-style tycoons.
Mr. Khodorkovsky said Russia's oil industry is now in a strong position and that Russian companies will be able to prosper even if prices fall below $18 per barrel in the coming year.
Yukos continues to grow. Its oil production is rising by 6 percent to 8 percent annually. Yukos and the rest of Russia's oil sector are eager to tap further into the Western marketplace.
But oil transportation bottlenecks threaten to limit the number of customers for their oil.
While much of Russia's oil goes to Europe, Yukos is realizing that U.S. ports are too far away for it to be cost-competitive with other U.S. suppliers like Canada, Mexico and Venezuela.
Yukos, in a bid to demonstrate its interest in linking up with Western markets, last summer sent a supertanker of Russian oil directly to the United States for the first time. But transportation issues will have to be ironed out before regular shipments from Russia to the United States become profitable.
Yukos last month joined three other companies in announcing a new pipeline that will carry oil from western Siberia to the deepwater port of Murmansk in northern Russia. Mr. Khodorkovsky noted that Murmansk was the port that the United States used to send lend-lease aid to help supply Russia during World War II.
Murmansk is closer to U.S. East Coast ports by water than Saudi Arabia. But it is not clear when the construction of that pipeline project, which is being controlled by the Russian government, will be completed.
"Unfortunately the government is not expanding pipeline capacity as quickly as we would like it to," Mr. Khodorkovsky said. "It is also not allowing us, the private oil companies, to help expand it more quickly."

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