The sanctions and the Arctic

In the debates on the impact of tougher sanction imposed by the US and the EU last week, one of the key issues is the scope of problems that Russia will encounter in developing the “green” oil and gas fields in the Arctic. The Economist calls it Arctic Chill, and many other mediaspeculate that Rosneft will have to curtail its exploration. Igor Sechin, the Rosneft CEO, indeed announced his dreamto discover a huge oilfield in the Kara Sea, but in fact very little is invested into making this dream come true. With the collapse of the Shtokman project, the exploration of the Arctic shelf has been reduced to minor activity in the current work-plans, and the contract that Rosneft had signed with North Atlantic Drilling Ltd (NADL) worth some $ 4.25 billion just a couple of days prior to the introduction of the sanctions, may go on according to Russian sources, while Sechin’s plan to acquire a share in the NADL is certain to be postponed. What is immediately important, however, is not the Arctic ambitions but the needs of Rosneft and other Russian majors to rehabilitate “brown” fields with Western credits and technologies. The inability to get access to the latter might lead to a serious decline in Russian oil production, but it is remarkable that the global oil market remains completely indifferent to this prospect – the oil priceregisters slight declinelast week. This trend should make the Kremlin worried, but it keeps entertaining some Arctic illusions, so that Russian Security Council plans a tour to the Prirazlomnaya platformlater this month. This is the off-shore platform against which Greenpeace staged a protest last year, and if there is one piece of good news on the High North coming from Russia – it is that the Arctic Sunrise ship has finally left Murmansk and is free to sail the seas again.