-Original Message-
From the World Bank Survey of the Russian Economy:
30. Russia's economy remains fundamentally dependent on oil and gas.
According to offical statistics, approximately 80 percent of Russian exports
in 2003 were natural resources, and 55 percent of all exports were from the
oil and gas sector. More than 60 percent of Russia's fixed capital
investments either go into the hydrocarbon industries or are in one way or
another related to the public purse. The budget itself is dependent on oil
and gas: 37 percent of federal budget revenues originate from
hydrocarbons
Saudi Arabia's Fall and Russia's Energetic Rise?
By Christopher Weafer
The increasing instability in Saudi Arabia, highlighted again by the weekend attack in
the eastern oil town of Khobar, is almost certainly bringing closer the day when there
will be a regime change in the country from the mainly pragmatic royal family (the
House of Saud) to a potentially more belligerent and anti-U.S. regime. That prospect
is the main reason why the United States, under the umbrella of the Russia-U.S. energy
dialogue, is pushing Russia to facilitate more investment in oil production and in the
provision of greater export capacity.
In return -- and taking into account similar if less formal understandings with the
EU, Japan and China -- President Vladimir Putin's administration can expect to see
remaining barriers to Russia's integration with the global economy, including WTO
admission, removed with relative ease, as well as an automatic seat at the top table
of global politics.
For the past three decades, the Saudi government has dominated and dictated strategy
within OPEC. That arrangement has suited Western consumer countries, particularly the
energy-hungry United States. In return for guaranteeing a high degree of
predictability in the long-term average export price plus surety of adequate supplies,
the legal status of the OPEC cartel has not been placed under scrutiny and the
security of the Gulf Arab regimes has been assured. That arrangement was called into
question as a result of the first Gulf War and effectively died in the aftermath of
Sept. 11, 2001.
Even if the Saudi regime were to survive, it would surely only be able to do so by
acquiescing to the internal pressures now threatening to overthrow it and, thus, would
effectively be forced to become a less reliable energy partner to net consumer
countries. Saudi Arabia's traditional role is now accruing to Russia and many assume
it will be cemented by the end of this decade. In anticipation of that, we are seeing
growing evidence of the Russian government's ambition to establish greater control
over the oil industry, possibly including the creation of a new state-controlled oil
company that would rank alongside the world's oil giants.
Over the past four years, the government has prioritized fast growth in oil exports
because it needed the cash and was content with retaining control only of the export
infrastructure. Recent evidence from Putin and several government ministers, including
energy supremo Viktor Khristenko, suggests that they would now like to see investment
priorities shift to reserve replacement (i.e., finding new wells) before resuming
growth in production later in the decade. That would also suit the broader economic
agenda, which is now focused on using the fiscal strength of the natural resource
industries to push Putin's core objective of growth diversification and wealth
distribution.
In order to derive maximum advantage from effectively displacing Saudi Arabia as the
main energy partner to the West and as a cushion against future OPEC uncertainties, it
makes sense that the Russian government would also want to control a large portion of
the upstream industry, through which it could, for example, conclude joint-venture
agreements with the international oil majors that are keen to get access to Russia's
reserves.
That would be consistent with everything we have seen over the past four years and
would go a long way toward explaining why the government moved so decisively to
prevent any strengthening in the influence of Mikhail Khodorkovsky's Yukos in
dictating energy policy, and why it now seems intent on acquiring control over
Menatep's controlling stake in the oil major.
To many, the current reaction of the oil market to the prospect of disruption in
export supply from Saudi Arabia, at a time when the reliability of exports from Iraq
is also in question, is a foretaste of what might be to come should a regime change in
Saudi Arabia lead to a more politically active OPEC leadership. Not only does that
offer the prospect of a much higher average price than the $20 per barrel of the past
20 years or the current $22 to $28 price band favored by Saudi Arabia and its more
moderate Gulf allies, it also opens the way for a cartel more inclined to use the oil
tap as a means of realizing
