Sakhalin-2-Reading Between the Lines

After much wrangling and consternation the legal claim of Shell and partners have been formalized with the Russian government. What does this mean when you read between the lines? The original deals were signed at a tumultuous time in Russian history by government officials that negotiated unfair deals to the detriment to their own nation. If the same were to occur in America, with foreign companies benefiting from an unstable Presidency or Congress, selling to the benefit of foreign interests, we would feel the same. Ultimately, an agreement was reached, all parties stand to reap benefits.

We feel the mass media has missed some important points. The Russian government asked Western companies to re-negotiate only deals negotiated during a legally and politically gray time in Russian history, not in recent years. Secondly, Western companies in this situation were put in a position to negotiate a mutually agreeable ending to the conflict, not told to pack up and go home. There are other developing countries, Algeria comes to mind, that are forcing oil companies to re-negotiate contracts due to the increase in the price of oil, not because of a fundamentally flawed process of negotiating process. Politically speaking, Russia is a rock of stability for the next two years of the Putin administration. It will be as well for the foreseeable future after that as well. Next time you read headlines about Russia, pay attention to what you see. The Russian government living up to its end of making a reasonable business environment, now contrast that with what you see in many other developing markets. Domestically, at this juncture most well run Russian companies know how to navigate the economic and political landscape of Russian society, but that will be discussed in a later entry…..