Moscow Signals Willingness to Allow American Oil Companies Operate in Russia Again

What Happened?

Ahead of the talks between the United States and Russia in Saudi Arabia, Russian officials say the return of American oil companies doing business in Russia is a real likelihood. 

Russian Direct Investment Fund chief Kirill Dmitriev said big American oil companies once thrived in Russia, and they would be wise to embrace the opportunity to do so again.

Mr. Dmitriev said he believes joint U.S.-Russia projects, especially in the Arctic region, would benefit both countries. 

Although Mr. Dmitriev’s comments signaled a new openness for American firms to operate in Russia, thus far there have been no responses from any of the major American oil producers. 

Why it Matters

Russian oil production faces a continuing dilemma. The country has vast oil reserves which have yet to be tapped, yet the country remains dependent on foreign technology to explore and tap into those resources. 

American firms once operated in Russia. But following the recent sanctions, only ExonnMobil is tied to assets in Russia. ExonnMobil had to give up its Sakhalin-1 project after the U.S. sanctions, but Russia has twice delayed the sale of those assets leaving their future in limbo.

Even if American firms want to act on Russia’s new invitation, the way ahead is unlikely to be simple or straightforward. Harold Hamm, founder of Continental Resources said “A lot of people lost a whole lot of money over there. I think they’re going to be very reticent to want to go back. Once in a while, peace breaks out over there, but not very often.” 

ExonnMobil and Chevron, the two largest American oil companies, didn’t comment on Mr. Dmitriev’s statement. 

Tatiana Mitrova, a research analyst at the Global Center on Energy Policy at Columbia University added “Political risks remain sky-high — sanctions relief could be reversed with a US administration change. Companies won’t rush back into a market where rules shift overnight.”

While there are substantial risks for oil companies seeking to return or operate in Russia, there are also sizeable potential rewards. Russia has some of the world’s largest oil reserves, and tapping into those assets could prove to be lucrative for American companies. 

According to the U.S. Geological Survey, there are 1.6 trillion cubic feet of natural gas and ninety billion barrels of undiscovered oil in the arctic. Russia itself is believed to have a quarter of a trillion barrels of untapped oil reserves. 

How it Affects You

Cooperation between American oil companies and Russia could help defuse tensions between the U.S. and Russian governments in the arctic region, which have been growing slowly over the past decade. 

If the Trump Administration lifts sanctions on Russia, the lure of potential profit may eventually convince American oil producers doing business in Russia is worth the risks.