Russia Flexes its Energy Muscle (again)

Since when have the Russian authorities ever cared about imposing and upholding environmental standards vis-à-vis big oil foreign companies? Since very recently it would seem ...

(From the FT)

'Russia was facing a global backlash on Tuesday over its threat to halt work on a $20bn (£10.6bn) energy project led by Royal Dutch Shell.

Japan led the chorus of anger. Shinzo Abe, chief cabinet secretary and front-runner to be next prime minister, warned the move would damage international relations and jeopardise foreign investment. The European Union voiced concern and Britain protested to the Russian authorities.

But even as the international community was protesting against the suspension of an environmental permit for the Royal Dutch Shell-led Sakhalin-2 project, it emerged that another large foreign energy project faced a similar threat.'

Yeah right ...

'On Tuesday Russia insisted its move to cancel the environmental permit for Sakhalin-2 was not politically motivated and was prompted entirely by environmental concerns.

If the move is ratified by Russia’s industrial safety agency, work on the huge gas and oil development would be halted.

Oleg Mitvol, deputy head of Russia’s environmental watchdog, accused the project operators of serious breaches of environmental law, including marine and river pollution on the Pacific island of Sakhalin. He expected the natural resources ministry’s decision to revoke the permit to be approved by a further technical body within days.'

This is more like it I should say and of course the gargantuan Gazprohm lures in the background ...

'The suspension of Shell’s permit has been widely seen as a tactic to secure a better stake in the project for the Russian government: a charge the authorities strongly rejected on Tuesday. The moves against Shell and TNK-BP come as the Kremlin looks to expand its influence over the energy sector. It is known to want Gazprom to take a substantial stake in Sakhalin-2. Gazprom is also seen as the front-runner to replace the private Russian partners in the TNK-BP venture.'

Kremlin knows the amount of leverage it holds on the energy issue and with Gazprohm as an obvious proxy for Moscow we can expect more of this as we go along.