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Crackdown on Russia Could Hurt Western Oil

Screen Shot 2014-02-18 at 18.34.00Extracts from an article by with the headline: Crackdown on Russia Could Hurt Western Oil.

As the United States seeks to strengthen sanctions on Moscow for its occupation of Crimea, energy experts say the powerful Russian oil industry would make a robust target. But any penalties on energy investments, technology transfers and financial transactions would most likely also punish Western oil companies like Exxon Mobil that are investing heavily in Russia.

“Everything is on the table,” said David L. Goldwyn, the State Department’s coordinator for international energy affairs during President Obama’s first term. “The calculus has to be who will be hurt most, us or them, if sanctions are put in place.”

As the heart of the Russian economy, the energy sector — led by state oil companies like Gazprom, Lukoil and Rosneft — would be a natural focus for pressure from the United States and its allies. Oil and petroleum products represent more than two-thirds of Russian export earnings, and they finance just over half of the federal budget.

But the rub is that the interests of the Russian companies — many led by powerful allies of President Vladimir V. Putin — are increasingly entwined with those of American and European corporations, with which they share critical projects.

Royal Dutch Shell and Total, the French oil giant, are invested in the nascent Russian business of exporting liquefied natural gas. Several Western service companies are also involved in Russia, drilling and completing wells with the newest hydraulic fracturing technologies.

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