Strongman by Roxburgh Angus

Author:Roxburgh, Angus [Roxburgh, Angus]
Language: eng
Format: mobi, epub
Published: 0101-01-01T00:00:00+00:00

Russia faced more criticism during 2006 as Putin and the siloviki moved to assert greater control over the country’s energy resources, some of which belonged to foreign companies. We saw earlier that the prospect of Yukos selling out to an American oil major was one of the factors that prompted the arrest of Khodorkovsky and the nationalisation of his assets. Now Putin turned his attention to so-called Production Sharing Agreements which Boris Yeltsin had signed with Western oil companies. Under a PSA, the foreign company finances all the development and exploration, and when the oil or gas comes on stream it is allowed to keep the first revenues to recoup its costs; after that the profits are shared (in agreed proportions) by the government and the company.

Putin believed these were humiliating agreements, the kind of deal a Third World country enters into because it doesn’t have the skills or knowhow to extract the oil itself. The first PSA, signed in 1994, was known as Sakhalin-2: a consortium called Sakhalin Energy, comprising Royal Dutch Shell (55 per cent) and two Japanese companies, Mitsui and Mitsubishi, was developing huge oil and gas fields near the island of Sakhalin in Russia’s far east. The development costs foreseen in the agreement came to $10 billion, so this was the sum that Shell and its partners would be able to recover from the first sales before any revenues would begin to flow to the Russian state.

In 2005, however, Shell revealed that the development costs had doubled, to $20 billion. On a visit to the Netherlands in November, Putin ‘gave a roasting’ to Shell’s CEO, Jeroen van der Veer. It meant Russia was going to lose $10 billion. It gave Putin the excuse he needed to overturn the 12-year-old deal, which he did by means of plotting and pressuring over the course of 2006. Instrumental to the government’s strategy was Oleg Mitvol, a fierce environmental activist who was deputy head of the government’s Service for Supervision of Natural Resources, Rosprirodnadzor. In May 2006 the service’s representatives from the far east region came to see Mitvol in Moscow and showed him some photographs. ‘It was unbelievable,’ he recalls. ‘There were photos of forests that had been turfed upside down, landslips, total chaos, on a huge scale. I said to them, “What is this?” and they said, it’s Sakhalin Energy building pipelines.’6 The construction work included almost a thousand pipes laid across spawning rivers, preventing fish from swimming upstream.

Mitvol made it a personal crusade. He took journalists to Sakhalin to show them the damage. Rosprirodnadzor estimated it would cost $50 billion just to clean up Aniva Bay, where large-scale dredging had ruined fishing grounds (something denied by Shell).

It was assumed by most observers at the time that Mitvol was simply doing the government’s bidding, digging up dirt to bolster its case against Shell. The press called him the Kremlin’s ‘attack dog’. But he insists that he was motivated entirely by environmental concerns and worked more closely with Greenpeace and other environmental groups than with the Kremlin.

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