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A Russian-American pipe dream

In the wake of the 9/11 attacks, the United States is shifting toward Russia — and away from the volatile Middle East — in its search for a steady oil supply. By Preston Mendenhall.
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Surveying the Arctic reaches of this shabby port city, Yuri Yevdokimov’s enthusiasm is irrepressible. The regional governor vividly recalls the Nazi advance on Murmansk during World War II when American ships delivered “lend-lease” war materiel to Russia through this frozen gateway. Lend-lease was a pipeline of goods key to Russia’s survival. Today, Washington is looking to forge a relationship with Moscow based on a new pipeline, this time carrying oil. Sixty years after America’s lend- lease program, Yevdokimov says, “Murmansk is ready to return the favor.”

With its decaying naval fleet, crippled fishing industry and frigid polar nights, this isolated northern Russian port has seen its younger generation flee the region in search of opportunity elsewhere for more than a decade now. That may soon change. In the wake of the Sept. 11 attacks, Murmansk could become a key transit point for Russian oil destined for the United States, oil free of the political price tag attached to Middle East petrol.

Last month, President Bush and Russian President Vladimir Putin brought together top oil executives from both countries to meet in the U.S. oil capital, Houston, whose gleaming coastal skyscrapers stand in dramatic contrast to the drab Soviet-era structures dominating Murmansk’s skyline. One oil executive attending the energy summit said the potentates of American and Russian oil politely listened to speeches, then quickly retreated to their hotel suites to negotiate the beginnings of real deals — like the Murmansk deep-sea port.

Some Russian oil companies aren’t even waiting for the pipeline, which would bring down the cost of getting Kremlin crude to the United States. The Tyumen Oil Co., Russia’s fourth-largest, has even proposed that the United States use Russian oil to replenish its strategic oil reserve. Yukos, another Russian oil firm, has started delivering tanker loads of crude to the Texas Gulf Coast. With a Murmansk pipeline not yet in place, the possible mega deals are still in their infancy — but the potential for a fundamental economic realignment is clear.

Short-term deal
The convergence of Russian and American oil interests comes at a crucial time: As Washington seeks international approval for a war with Iraq, Russia has positioned itself as a pivotal ally for the Bush administration’s goals in the Middle East.

The Kremlin fears that if Washington successfully topples the Iraqi dictator, American companies will take over the world’s second-largest oil reserves, and billions of dollars worth of contracts that Russian oil companies have signed with the current Iraqi regime will be annulled. Russia is also seeking Baghdad’s repayment of some $8 billion in leftover Soviet debt.

Analysts say Russia’s decision not to veto Friday’s U.N. Security Council vote on a new resolution to strip Saddam of his weapons was influenced by pure economics. Moscow’s vote for the Iraq resolution, experts say, is likely the result of U.S. assurances to the Kremlin that Russian IOUs will be honored and that future Iraqi oil deals will include the Kremlin as a key player.

Long-term gain
Beyond the current Iraq chess game, analysts say, Russia and the United States have much to gain in the long term from an oil alliance.

Washington’s energy security has been tied for decades to Mideast oil dictatorships that have become increasingly unpopular among their own citizens. U.S. standing also has been damaged by what some nations in the region say is Washington’s biased support of Israel in its conflict with the Palestinians.

U.S. vulnerability to perennial Mideast instability could be tempered by a steady Russian oil supply, analysts say, and a Russian-U.S. oil alliance could break the stranglehold of the OPEC oil cartel, led by Saudi Arabia.

Russia’s oil output was cut in half after the fall of the Soviet Union, so becoming a regular supplier to the United States is a lucrative opportunity for Moscow.

Experts conclude such an alliance is inevitable.

“Sept. 11 consolidated and maybe a little bit accelerated the improvement of bilateral relations,” said former Russian Foreign Minister Andrei Kozyrev, who was fired by Putin’s predecessor, Boris Yeltsin, for pushing many of Putin’s policies nearly a decade ago. “In the end, it’s in the best national interest of both sides to cooperate, like in the oil and gas fields.”

And many of Russia’s regions still waiting for foreign investment more than a decade after the collapse of the Soviet Union, the American-Russian oil rush couldn’t come a moment too soon.

In Russia’s Far North, Gov. Yevdokimov has watched 25 percent of Murmansk’s 600,000 residents abandon their dreary lives in a desperate search for work elsewhere. A Russo-American oil pipeline could stem the flow of the region’s best and brightest.

“Quite simply, it will be a new lease on life for Murmansk,” Yevdokimov said.

Sixty-one years after America’s lend-lease act saved Murmansk — and much of the country — from the Nazis, the United States could be coming to the rescue once again.