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Guardian Unlimited: Darling tells Russia to play by the rules

Tom Parfitt in Moscow
Thursday February 8, 2007

The trade secretary, Alistair Darling, warned Russia today to “play by the rules” and ensure “legal certainty” for British investors as he ended a three-day visit to Moscow.

Anglo-Russian relations have become strained after tensions over the murder in London of the former KGB agent Alexander Litvinenko and the recent travails of British companies such as Shell and BP.

His sharp comments followed talks with Alexei Kudrin, finance minister, designed to shore up Britain’s interests in Russia in anticipation of a troubled period of diplomacy. Britain was Russia’s biggest foreign investor last year with £2.8bn invested in the first nine months.

Mr Darling said he raised his concerns that foreign investors in Russia were not facing clear ground rules with Mr Kudrin and the energy minister, Viktor Khristenko.

He criticised the state-run energy company Gazprom’s takeover of a majority stake in Shell’s huge Sakhalin-2 oil and gas project in December. “There was an initial backlash following Sakhalin and they [the Russians] are aware of that.”

On BP’s problems at its Kovykta gas field, he said: “What we have said is that people are now apprehensive, and it would be far better if these matters were settled in accordance with established laws.”

Russia’s environmental watchdog, Ros­prirodnadzor, reported last month that the TNK-BP Anglo-Russian venture was in breach of its licence because it had underexploited the field. It is widely thought the breach claim is a means of persuading TNK-BP to cede control of the field to Gazprom.

Shell’s Sakhalin-2 was paralysed by similar accusations of environmental violations, which disappeared once Gazprom took a 50%-plus-one-share stake.

Analysts say there is a concerted effort by the Kremlin to seize control of the oil and gas sector, the engine of Russia’s booming economy. Russian officials admit privately that they feel cheated by some of the production-sharing deals signed on disadvantageous terms with British companies such as Shell in the 1990s.

A new law to go before the Duma this year is expected to formalise the practice that state-run companies get a controlling stake in major oil and gas projects.

Tensions are expected to rise this month when Russian prosecutors travel to London to question the exiled businessman Boris Berezovsky over the poisoning of his associate, the former security service officer Litvinenko, in November.

“We are trying to keep the Litvinenko affair and the business ties totally separate but the Russians have a tendency to bundle them all together,” said one British official.

Mr Darling’s comments today came as Lord Jenkin of Roding, a former energy minister, told the House of Lords that any moves by Gazprom to buy the largely British-owned Centrica should be “knocked on the head”.

He accused Russia of “shamefully bullying” Shell and using energy as an instrument of foreign policy.

http://business.guardian.co.uk/story/0,,2008918,00.html

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