- The Washington Times - Friday, September 22, 2006

The State Department yesterday sharply criticized a recent move by the Russian government to curb a major Western oil-and-gas-investment project in Siberia, saying it put in doubt Moscow’s willingness to honor major energy deals with foreign investors.

Spokesman Tom Casey said the Bush administration was “very concerned” by a Russian government move earlier this week to revoke the environmental permits for a $20 billion liquefied natural gas project being developed by the Royal Dutch Shell Group and two Japanese investment houses on Sakhalin Island.

Analysts fear revoking the environmental permit could be tantamount to killing the deal or forcing the international partners to sell out.

“Frankly, these actions cast doubt on Russia’s willingness to uphold its recent commitments that were made by all the G-8 countries at the St. Petersburg summit,” Mr. Casey said.

Those commitments, he added, included a pledge to develop “transparent and efficient global energy markets,” as well as “specific obligations to uphold contracts.”

Officials at the Russian natural resources ministry yesterday raised fresh questions about a second Sakhalin project being developed by U.S.-based Exxon Mobil Corp., complaining the rising company estimates of the cost of the project were cutting into Moscow’s promised share of the returns.

Mr. Casey said the U.S. government was not aware of any action against the Exxon Mobil project, but that the actions taken against the Dutch-led project, the largest single foreign investment in Russia, were worrisome.

The commercial dispute comes against a backdrop of alarm in the United States, Europe and Japan that Russia under President Vladimir Putin is increasingly ready to use its clout as a global energy superpower to further its commercial and diplomatic interests.

Western European countries faced a brief supply scare at the beginning of the year when Russia’s state-controlled oil company cut off supplies of natural gas to neighboring Ukraine in a bitter pricing dispute. Many suspect that Gazprom is angling to control the network of pipelines supplying natural gas to Europe.

Exxon Mobil, Royal Dutch Shell and the French energy company Total SA won contracts to develop three huge oil and natural gas fields in the Russian Far East in the 1990s, before the Kremlin under Mr. Putin began a concerted effort to reassert state control of the country’s vast energy resources.

Mr. Casey’s remarks followed similar criticism this week of the Russian action against the Shell project from the European Union and the governments of Britain, Japan and the Netherlands.

Mr. Putin is in Paris today for a summit with French President Jacques Chirac and German Chancellor Angela Merkel. The meeting will include talks on Russia’s energy policy toward Europe and Russian hopes to expand its investment in EADS, the European aerospace consortium.

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