Last week, the West laid down a new round of sanctions on Russia that included, amongst other measures, bans on the transfer of offshore and shale drilling technologies. The logic behind these bans was straightforward: Russia’s best bets for future oil and gas production lie in offshore and shale reserves, so by restricting just these sectors of Russia’s energy industry, the EU could hamstring Moscow’s future ambitions while leaving the bulk of Russia’s present production—in maturing, conventional onshore fields—untouched. In this way, the EU can tighten the screw on Russia without endangering its own energy interests in the short term (the EU relies on Russia for 30 percent of its natural gas needs).But Russia is finding ways around these U.S.- and EU-led measures by going to other developed countries. For instance, Japan is desperate to secure steady supplies of energy imports, given its post-Fukushima drawdown of nuclear energy; it is continuing to invest in Russian projects. Bloomberg reports:
Japan won’t be keen on deeper sanctions that would curb its access to gas, oil and coal from Russia, said Will Pearson, a London-based director of Eurasia Group, an energy and natural resources consultant. “Japanese firms are very interested in accessing Russian natural resources, thanks to their proximity,” he said.Japan buys about 65 percent of the liquefied natural gas coming from Russia’s Sakhalin-2, a 9.6 million metric ton-a-year project, according to Leigh Bolton, managing director of Holmwood Consulting Ltd., a Surrey, England-based energy consultant. Neither country will break the contracts based on sanctions, he said.
But Japan isn’t the only country keen to get at Russian oil and gas. As Business Insider reports, firms from Norway and Switzerland (neither of which are EU members) have finalized agreements with Russia:
In early August 2014, Rosneft bought a stake in one of the world’s largest oilfield contractor companies – Swiss Weatherford, RBTH learned from the press service of Rosneft…According to the agreement, the Russian side will receive eight subdivisions engaged in drilling and well repairs in Russia and Venezuela. […]Rosneft has also signed a long-term agreement on offshore drilling with the Norwegian company North Atlantic Drilling Ltd. The transaction involves the purchase, up to the year 2022, from the Norwegian side, of six offshore rigs for offshore production, including for work in Arctic conditions.
None of these agreements will mean much for Russia’s exploration of its prodigious shale oil and gas reserves; the necessary know-how on that front lies predominantly within American companies. But these contracts will help Russia tap into its Arctic reserves and in so doing will partially circumvent last week’s sanctions. Russia’s shale future is still very much in doubt, but Moscow is demonstrating its ability to leverage its enormous oil and gas production to divide and conquer the West.