Article
For years, the United States anchored global cyber diplomacy. As Washington rethinks its leadership role, the launch of the UN’s Cyber Global Mechanism may test how allies adjust their engagement.
Patryk Pawlak, Chris Painter
{
"authors": [
"Mikhail Krutikhin"
],
"type": "commentary",
"centerAffiliationAll": "",
"centers": [
"Carnegie Endowment for International Peace",
"Carnegie Russia Eurasia Center"
],
"collections": [],
"englishNewsletterAll": "",
"nonEnglishNewsletterAll": "",
"primaryCenter": "Carnegie Russia Eurasia Center",
"programAffiliation": "",
"programs": [],
"projects": [],
"regions": [
"Russia"
],
"topics": [
"Economy",
"Trade",
"Climate Change",
"Foreign Policy"
]
}
Source: Getty
Commentary
A Mixed Blessing?
The effect of the new sanctions on the Russian oil and gas industry might be very sensitive while at the same time saving large sums of money on projects with impossibly long payback prospects. Either way, Western governments are now doing basically what the Russian leader always wanted, staying away from Russia’s oil and gas.
By Mikhail Krutikhin
Published on Jul 31, 2014
The effect of the new sanctions on the Russian oil and gas industry might be very sensitive. Limited access to advanced technologies will impede or derail Russian projects of developing reserves on the continental shelf—particularly in Arctic seas. Domestic companies have not mastered such technologies and have next to no experience in offshore upstream ventures.
Many of these technologies cannot be replicated by the Russians, even though many government officials keep saying the national industries can be upgraded quickly to get on without any foreign assistance.
Partnerships may fall apart if the sanctions are imposed fully. Rosneft, for example, will be unable to build its LNG plant on Sakhalin Island and explore reserves in the Kara and Black Seas without the assistance of ExxonMobil. There will be awkward moments for such partners of Russian government-controlled companies as Shell, Statoil and Total as they begin closing down their offices in Russia.
The most powerful blow will be dealt to Russia’s expensive projects by the impossibility to borrow foreign cash on a long-term basis.
For Gazprom, it could be a mixed blessing. If the company cannot raise funds to finance its politicized and commercially non-viable projects, it might be told by the Kremlin to drop the ideas of building the Power of Siberia pipeline or the LNG plant in Vladivostok. Huge amounts of money would be saved for the national economy rather than wasted on projects with impossibly long payback prospects.
Unfortunately, this is probably but a dream. The Russian leadership has never stopped at such trifles and launched uneconomical projects regardless of their negative value just to make ‘friendly’ contractors happy. In this case, the missing funds would be taken from social programs—or taxes would be raised, or…
Paradoxically, the decision of the Western governments to restrict their companies’ participation in the Russian oil and gas industry, and prevent banks from lending money to Gazprom or Rosneft, is essentially a continuation of a process launched by Vladimir Putin in 2008. It was the Russian president who initiated a series of xenophobic bills that restricted international companies’ access to mineral licenses, large-scale projects and any form of equality with domestic players in this business. It was a very heavy blow on the industry. Today, Western governments are doing basically what the Russian leader wanted them to do, staying away from Russia’s oil and gas.
Mikhail Krutikhin is a partner at the independent RusEnergy consulting agency.
About the Author
Mikhail Krutikhin
Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.
More Work from Carnegie Europe
- Resetting Cyber Relations with the United States
- Global Instability Makes Europe More Attractive, Not LessCommentary
Europe isn’t as weak in the new geopolitics of power as many would believe. But to leverage its assets and claim a sphere of influence, Brussels must stop undercutting itself.
Dimitar Bechev
- Europe on Iran: Gone with the WindCommentary
Europe’s reaction to the war in Iran has been disunited and meek, a far cry from its previously leading role in diplomacy with Tehran. To avoid being condemned to the sidelines while escalation continues, Brussels needs to stand up for international law.
Pierre Vimont
- Taking the Pulse: Can European Defense Survive the Death of FCAS?Commentary
France and Germany’s failure to agree on the Future Combat Air System (FCAS) raises questions about European defense. Amid industrial rivalries and competing strategic cultures, what does the future of European military industrial projects look like?
Rym Momtaz, ed.
- Macron Makes France a Great Middle PowerCommentary
France has stopped clinging to notions of being a great power and is embracing the middle power moment. But Emmanuel Macron has his work cut out if he is to secure his country’s global standing before his term in office ends.
Rym Momtaz
