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Speech is Free, Cash is King

Pat Davis Szymczak

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To my Russian, European and Asian readers - please excuse me. This month, I really need to write a letter home. But do keep reading. I hope this will be fun, if not even educational.

My fellow Americans!

Please accept my apologies for having observed in my March column that a Moscow restaurant near the Oil&Gas Eurasia office had refused to serve Americans and Britons on the first day of the Coalition advance into Iraq. My Director of International Sales in Houston was not amused; and that's because - he tells me - that many of you were not amused. He says I 'scared you' and now you're afraid to come to Russia.

Well, I certainly didn't mean to. The truth is, on Day 2 of the war, the sign came down. The Russian owner had vented his emotions for 24 hours. But, as a businessman with an investment to protect, his No. 1 concern is making money. And he's one of those Russian restauranteurs near the Kremlin who offers tourists a menu in English.

This reminds me of the war to eject the Taliban from Afghanistan. I was vacationing at the time with Russian friends in Sharm el Sheik and I really wasn't all that keen about traveling to Egypt at a time the mass media was making it clear that Egyptians disliked Americans. But, the Sinai was the cheapest 10-day ticket out of Moscow. So I vowed to only speak Russian (the Egyptians would never figure out the accent.) Problem was, the three tee-shirts I had packed all declared in red, white and blue 'Ambassador's Club - American Embassy Moscow,' complete with the Great Seal of the United States, eagle and all. (That's our health club guys, nothing fancy.)

Apple Tea, Time to Talk Politics in Egypt

So, as fate would have it, I soon found myself sipping apple tea in a Sharm el Sheik perfume bottle boutique while the Egyptian owner lectured me for an hour about all the things he hated about US

foreign policy - notice please, he didn't hate Americans, he disagreed with US policy out of Washington. He wanted to practice his 'English,' he told me, and he said he was sad that so few Brits and Americans came to Sharm el Sheik. (I met one British couple that trip, but it seemed I was the only American in town.) Then I asked him if he owned his store. He told me, 'no,' but he was working hard because he wanted to save money, move to New York City and open a restaurant. Have I made my point?

Americans are identified world-wide as the missionaries of 'globalization', yet there are far too few US businesses with the courage and foresight to engage in commerce abroad. And in the oil and gas industry, that is a major mistake. We are a global industry. And why am I, an American whose ancestors came to the 'English colonies' in the mid 17th Century, so high on the Russian oil industry? Because the Russian oil industry and the US oil industry are fated to be major league partners in the nearest future. Emotions and 'who likes who' this week, according to CNN's sampling of public opinion in Peoria, Ill., aren't driving this alliance. What's driving it are hard facts dictated by who has what natural resources, who has money to buy, and the pursuit of national interests - which in the case of US and Russian energy policy seem to be both American and Russian.

Didn't you notice that it was 'before the shooting started' and within the forum of the UN Security Council debate that Russian President Vladimir Putin was most vocal internationally about his opposition to the war in Iraq? During the war, I saw only France's Jacques Chirac on - take your pick, Sky News, BBC, CNN. Not much has been heard out of the Kremlin since. I suspect that's because Russia's leadership is putting its energy (pardon the pun) right now into the Presidential US-Russian Energy Summit planned to be held in St Petersburg in the autumn.

Welcome, Mr. Bush, to St Petersburg

Yes, that's right my fellow Americans - US President George W Bush, former governor of the Great (oil) State of Texas; a man whose family name is synonymous with the oil business; a president who gets picked apart (not in wartime) by the liberal media for favoring oil interests - that very same George W Bush is expecting to break bread with Vladimir Vladimirovich Putin to seal the above mentioned US-Russian energy alliance.

May I say, 'bravo' to Mr Putin who is facing re-election and has had to balance hard line critics (communists and nationalists) who can't forget the Cold War, against Westernizers who (like Mr Putin) see Russia's future as being closely entwined with that of Europe and of the United States. Those who can't give up the habit of letting their emotions dictate their business life, should take note of this 'feel good' symbolism: St Petersburg - site of the Presidential Summit - celebrates the 300th anniversary of its founding this summer by Czar Peter the Great, Russia's most famous Westernizer. St Petersburg is also Mr Putin's hometown.

So, what more do you want? We've already written in February about how BP's purchase of Russian major TNK (together with its previous acquisition of assets of the SIDANCO oil company) had turned BP into Russia's third largest Russian oil company. Speculation in a recent article in the London press that Shell might soon have similar acquisition ambitions with respect to another Russian major were a hot cocktail party topic at a refining business conference organized in Moscow in April by Euro Petroleum Consultants Ltd.

Piping Oil to the US Via Murmansk

And now for the latest 'smart bomb.' Just before Easter, the Russian government announced that it would not oppose the construction of 'privately owned' pipelines. The decision relates to the construction of a new, trunk export pipeline to Murmansk by what is likely to be a consortium of Russian and US players led by LUKoil, Russia's largest oil company. LUKoil, by the way, has gasoline stations in the United States through its acquisition of Getty Oil marketing in New England. It also has a gasoline station outside Washington DC. And it is LUKoil that is making the most noise about boosting Russia's share of the US crude import market to 13 percent in seven years from current negligible levels.

The Murmansk pipeline and port developments are intended specifically to facilitate Russian crude exports to the United States and to boost exports to Europe. The English language daily The Moscow Times quoted officials as saying that Russia is seeking another 3 mln bpd of annual export capacity. It currently exports 2 mln bpd of crude out of the 8.2 mln bpd it produces. Russia wants to boost output to 10 mln bpd in the nearest future - US refiners stand a good chance of getting a lion's share of that increase.

And so, at a time when my president, your president, our president, Mr George W Bush, is enjoying his highest approval ratings ever, may I suggest that you 'follow him' in September to Russia. If you can't find a hotel, call Oil&Gas Eurasia, and we'll find some friends willing to put you up in the spare rooms of their apartments. Never forget that while Russians, like people everywhere (including the Egyptians), love to tell you their opinion, sometimes very emotionally and sometimes literally 'in your face,' it is rare that anyone refuses to accept the great equalizer - cash.

Again, my apologies for ignoring Oil&Gas Eurasia's readers outside of the US. Sometimes, family matters must come first.?

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