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Vladimir Soprano

Vladimir Putin (center) with Mitsubishi president Yorihiko Kojima (left) and Mitsui president Shoei Utsuda.jpg

Some of the world's major energy companies are learning a hard lesson about President Vladimir Putin's Russia. It is the same lesson that Putin's political opponents have absorbed, along with independent journalists, human rights activists, and certain oligarchs who fell afoul of the plutocratic KGB veterans who form Putin's inner circle.

Royal Dutch Shell and its Japanese partners, the Mitsui and Mitsubishi companies, learned it when they were forced to sell a majority share in Sakhalin-2, the world's largest combined oil and natural gas development project, to the state-controlled Russian company Gazprom. They learned that the Kremlin's way of doing business bears a striking resemblance to Tony Soprano's.

After Shell and its partners informed Russian authorities that the anticipated costs for the Sakhalin-2 project would run to $22 billion instead of the $10 billion originally estimated -- meaning that the Kremlin would not see any revenue until the foreign companies recovered their investment -- environmental regulators turned up to warn the foreigners that the project would be harming trees. At first, Shell and its partners tried to accommodate the regulators. Finally, however, they were made to understand that the only way to make their ecological problems go away was to let Gazprom purchase 50 percent plus one share of Sakhalin-2 for $7.45 billion -- a steeply discounted price.

As a result of Putin's gentle persuasion, the new partnership will be in a position to sell liquefied natural gas from the Pacific island Sakhalin to expanding markets in Asia and North America. Putin recently assured the principals that their problems with the environmental agencies were resolved.

The moral of the story for foreign investors is that Putin and Co. demand a majority share in lucrative energy projects. For consumers of Russia's energy supplies, the conclusion is more worrisome: The Kremlin's blatant drive for monopoly control of Russia's energy resources suggests a symbiosis between politics and energy supplies.

Countries in Western Europe shivered last winter when Russia, for political reasons, reduced natural gas shipments in a pipeline traversing Ukraine. And just this past week, Gazprom warned Poland, Lithuania, and Germany that natural gas deliveries could be interrupted because of a nasty quarrel with Belarus about the rates the Kremlin wants its erstwhile ally to pay. The price for Belarus is being raised because of political differences between Putin's cronies and the regime of Belarus's dictator, Alexander Lukashenko.

Tony Soprano would do the same if he had a country like Russia to call his own.

© The New York Times Company

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