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Jan 24

After Yukos: Facing the New Paradigm in US-Russian Energy Relations - Policy Proposals for Russia and the United States

Location: The Heritage Foundation's Lehrman Auditorium

The new paradigm in the Russian oil and gas industry can be summarized in two words: State domination. The bankruptcy and dismantling of the Yukos oil company - a 2 percent contributor to the world's oil production - and the nationalization of its main production unit are two major developments in the transformation of Russia's lucrative oil and gas sectors.

Yuganskneftegaz, the main production unit of Yukos hastily sold at the contrived auction last December, has changed its owner twice (within less than a month), from the shady Baikal Finance Group to the state-owned Rosneft. Now, rumors are afloat that 20% or more of its shares may be offered to a foreign oil company. The upcoming merger of Gazprom with Rosneft will yield the near-monopoly on gas production, transportation and exports, and a Russian equivalent of Saudi Aramco in oil production. This, coupled with the government's grip of the Russian antiquated oil exporting pipeline infrastructure, gives the state an absolute control over oil and gas exports.

The Putin Administration has frowned upon any resistance and criticism of the way the Yukos affair was handled. One of the already notable implications is the increased capital flight from $2.9 billion in 2003 to $9 billion in 2004. But foreign investors still hope that the Yukos affair is the exception rather than the rule. In this context, how short will the memory of the investors be? Can China rely on Russian oil supplies? With Russia remaining a major non-OPEC oil exporter, mainly to the EU

and Asia-Pacific countries, is U.S.-Russian energy cooperation at risk?

Please join us as our excellent line-up of experts explores these pressing issues.

More About the Speakers

Edward Chow
International Energy Consultant

Dmitry Sidorov
Washington Bureau Chief, The Kommersant Daily, Moscow