Russia Proposes Its Own Fuel Bourse in Wake of Market Panic

It’s impossible to be timely in a monthly print publication so I’m afraid to even mention international finance. In the week it takes to print this issue of Oil&Gas Eurasia, God alone knows what could happen. So I invite you to stay current by visiting www.oilandgaseurasia.com. You’ll find daily news updates from our Moscow-based news team, and ongoing exchanges of opinion on our blog.
But international finance? I’m sorry; I can’t avoid the subject. So class, raise your hands now! How many of you have heard that Russia opened an online fuel bourse on September 25? Who has heard that Russian national oil company Rosneft wants to sell half of its oil through this online fuel exchange?
And who has heard that Russian Prime Minister Vladimir Putin has been quoted in Russian media that this is a step towards making the ruble an international reserve currency? That First Deputy Prime Minister Igor Sechin lauded the move in comments to English language RT television as a development that would “increase transparency.” Or that Rosenft President Sergei Bogdanchikov told the same RT: “This removes intermediaries and will bring down the price of oil. We hope 50 percent of our trade will eventually go through these exchanges.”
Crazy? I don’t know, though I will say that the same idea was floated as a trial baloon in 2006 and went nowhere. I know that Iran has more than once called for oil to be traded in euros and that this has been dismissed as hot air designed to annoy the United States and grab a few headlines. But a Russian fuel bourse? Let’s not be hasty. In e 1990, when I was a staff writer at The Chicago Tribune, our foreign editor (who had been a correspondent in Moscow in Soviet times) told me that the Soviet Union could not collapse. Ten years ago a friend asked me if mutual funds were a safe investment and I told her it was safe because the world economy would need to collapse for her to lose money. Last week, I called her to apologize. She’d put her money into so called “blue chips!”
So frankly I haven’t the slightest idea what might happen. And if you, dear reader, have an opinion about this Russian bourse thing, please write me at p.szymczak@eurasiapress.com. I do know that with the Internet now, it is possible to read and compare information from a variety of sources and decide for yourself what’s happening. I’ve just spent three weeks in the U.S. watching presidential campaign coverage on the domestic Fox News and CNN television channels. These two news sources send reporters to the same events but you’d never believe it was the same event by watching the coverage. Thank God the BBC and The Economist magazine can provide some balance.
But let’s get back to Russia. This issue of Oil&Gas Eurasia is especially important because it is the Official Show Issue for the SPE Russian Oil&Gas Conference and Exhibition 2008. As such we’re highlighting trends in R&D and technologies for Russia as well as from Russia. I’d like to draw your attention particularly to our coverage of the production of aluminum tubulars and risers for deep water offshore drilling. Mikhail Gelfgat, founder and head of Russia’s Aquatic Co. developed this technology beginning in the 1990s and first marketed it to the west. Now, with Aquatic’s acquisition by Weatherford, new markets for this Russian product will be opened.
What makes me stop and think about the ramifications of a Russian online bourse is the sheer magnitude of the Russian oil and gas market and it’s potential. And the size of Russia’s reserves are only part of it. Last week I was in Samara where the international services company Weatherford was celebrating the opening of a new training center at Samara Polytechnic University. As you could image, the guests hailed from a variety of foreign countries and Russian regions. And while you might criticize what I am about to say as naïve because it is anecdotal, all the folks I spoke with – when asked about their view on the international financial crisis – were optimistic about Russia.
Their logic goes like this: Russia needs to produce and sell its oil and gas to prosper and reinvest in broadening its economy. But Russia’s current production comes from mature reserves which have recently begun to again decline. To keep production stable, let alone to increase production, Russia will continue for the foreseeable future to require new technologies – from the West as well as home-grown technologies assisted by Western technology transfer. This is in fact why international companies’ global brands in oilfield services, technology and engineering, equipment and supply have been quietly establishing operational centers in Russia over the last few years. This trend will continue because, as several persons I have spoken to recently have said, “the future is the Eastern Hemisphere.”
I’ll now leave you with this. Last month I spoke at a joint conference in New York of ABMi (American Business Media) and FIPP (Federation of International Periodical Press). My talk was about b2b publishing in Russia. As often happens, I endured jokes about the mafia, the KGB, Communists (I forgot, who were they?) etc. Yet at the same time, none of my fellow publishers thought it a problem at all to work in Mexico City where one of the biggest money making businesses in town is kidnapping foreigners and well-known Mexicans for ransom.
It all boils down to a lack of understanding which makes people unable to move forward even while the world is changing right under their feet. I think Russian President Dmitry Medvedev said it best when he was recently quoted as saying that there are too many “Sovietologists” left in the world, and too few Russia specialists. Keep that in mind if your first reaction to my “Russian fuel bourse” comments was to laugh, or even to smile somewhat skeptically.

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