Russia Desperate for Outside Expertise to Produce Oil&Gas

Prime Minister Putin's corrupt prosecution and dismantling of Yukos has left Russia's vast energy wealth in the incompetent hands of national companies. National companies typically lack the expertise to develop difficult fields, and to produce oil and gas at optimal levels, for maximum yields over time. Hence the recent deals by Rosneft with both BP and Exxon Mobil. Russia has vast energy wealth, but the demographic clock is working against Russia. It has to work fast to reap the benefits of a Siberia that is slowly slipping from its grasp.

The foreign partners put up the initial upfront cash, Rosneft contributes much of the deal in the form of its licences and the Russian group ends up with two-thirds of the economics. That may look like a good deal for Moscow, but it is really a reflection of reality. Resource-rich nations want to keep an increasing share of profit for themselves and are only cutting in foreigners when they have something distinctive to offer.

Of course, in BP's case, Moscow was also able to secure a stake in its partner, because of the U.K. company's vulnerable situation. BP wasn't the most popular company in North America after the Gulf of Mexico disaster. It also had more exposure to Russia than Exxon. The result is that Exxon has maintained its independence, whereas BP won't easily shake the niggling suspicion that Moscow will somehow, sometime find ways of increasing its influence. _FinancialPost

The US Obama administration has been sucking BP dry for a while, so now it is time for Russia to have a go.

Although the world economy is desperately dependent upon oil, world governments are not above using the extortion card which a monopoly on the use of force within their borders allows them.