U.S. seeks to boost energy ties with Russia, citing vast reserves ; Urges improved investor climate

May 25, 2005 - Record, Northern New Jersey
Author(s): Steve Gutterman, The Associated Press

 

MOSCOW - U.S. Energy Secretary Samuel Bodman sought Tuesday to boost energy cooperation with Russia, which has lagged far behind what U.S. officials say is vast potential amid concerns about Russia's investment climate and questions about its desire for closer ties.

 

In meetings with Russian officials, including Prime Minister Mikhail Fradkov and the ministers of energy and trade, Bodman stressed the "compelling case" for the Cold War foes to work together: The United States is seeking more energy sources, while Russia needs investment to boost exports and revenues from its vast reserves.

 

He said Russian officials had expressed their commitment to working more closely with the United States, but that the government's pursuit of the Yukos oil company and other decisions have clouded the investment climate and the future of Russian-U.S. energy cooperation.

 

Russian oil exports to the United States have reached 230,000 barrels per day, Bodman said.

 

"But it should be 10 times that or more, given the reserves that are here," he said. "And it's a matter of having an environment, getting investments made."

 

He said a slowdown in the growth of Russian oil exports, from an annual rate of more than 10 percent two years ago to just 4 percent through April, underscores the need for Russia to clear up a murky legal environment. The figures "reinforce the need for clarity," he said.

 

Bodman, whose first visit to Russia came near the end of former Yukos oil company CEO Mikhail Khodorkovsky's politically charged trial, said the government's treatment of Yukos "has raised questions about the independence of the judiciary, the sanctity of contracts and the sort of transparency that investors are interested in."

 

Khodorkovsky is expected to be found guilty of fraud and tax evasion in a trial widely seen as punishment for perceived political ambitions. His company has been torn apart by back tax claims and has been partly nationalized.

 

U.S. officials describe closer energy cooperation with Russia as a win-win situation, and President Bush and Russian President Vladimir Putin ordered their governments to seek to boost cooperation at a February summit.

 

"It's in the interest of Russia to have greater exports, particularly at the prices we're talking about today, and it's in the interests of the United States to have more diverse sources of supply," Bodman said. "It's a compelling case."

 

Bodman said that despite positive signals from officials, Russia's commitment to energy cooperation can be measured only by concrete deals.

 

"Until they make a decision and a deal is done, then I have to assume there's a question," he said.

 

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