Exxon Oil Rig Enters Uncharted Waters of Russian Political Storm

Reuters

OSLO, July 21 (Reuters) – An ordinary, long-scheduled journey of an oil drilling rig into Arctic waters is turning into a major political exercise, attracting international scrutiny and creating a dilemma for ExxonMobil.

Exxon, the top U.S. oil major and the world's most valued oil company, is bringing the rig, called West Alpha, from Norway to the Russian Arctic. It is hoping for a major discovery in the Kara Sea with Russian partner Rosneft.

The journey has begun just as the United States has slapped the toughest sanctions yet on Russia, including on Rosneft, over escalating violence in Ukraine. Further sanctions are likely after the downing of a Malaysia Airlines' plane in eastern Ukraine.

The joint activity does not necessarily break the latest sanctions, but the rig's mission will be seen a sign that a top U.S. company is backing Moscow.

Arctic exploration costs can exceed hundreds of millions of dollars. The Exxon-Rosneft drilling campaign, therefore, will also show how effective the latest sanctions prove to be in prohibiting U.S. firms from providing new long-term debt or equity to Rosneft.

"It's a bit discordant with the message that the United States government is trying to send, having this long-planned summer drilling season go ahead right now," said Elizabeth Rosenberg, energy program director at the Center for a New American Security think-tank and a former sanctions adviser at the Treasury Department.

From a broader prospective, the project will indicate the resolve of major oil companies to continue dealing with Russia even as conflict escalates with the West.


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