The partnership between Rosneft and ExxonMobil to explore and develop Russia’s Arctic Basin has been met with some skepticism – understandably given some of the experience of western oil majors in Russia. But the deal is potentially of major significance for the Russian investment environment.
Exxon was one of the first western oil companies in Russia after the fall of the Soviet Union and is unlikely to have gone into the Arctic deal with Rosneft with its eyes closed. In terms of what it means for the Russian investment environment and, potentially for Rosneft, it can prove very significant, for four reasons:
First, it shows that the Russian oil sector is still open to international majors. This deal indicates that Exxon is convinced of opportunity in Russia.
Second, it shows American companies are welcome and are choosing to invest in Russia. While it seems that European companies, particularly German, are more comfortable investing in Russia, and that Russia has been looking increasingly toward Asia for investment, the Exxon deal proves that, at least commercially, ties with the U.S. remain important.
Third, it should be seen as a big signal of Russia’s intentions post-next year’s presidential elections. Prime Minister Vladimir Putin wants to build a powerful economy and recognizes the need for foreign investment.
Fourth, it is the latest example of Russia’s national champions going international. It has been difficult for emerging market oil companies to make an impact outside of their own countries. Rosneft now has the opportunity to shift from being a national oil company into an international oil company.