F. William Engdahl | New Eastern Outlook | 13 Oct 2014
US President Barack Obama, or at least the warhawk neo-conservatives pushing him to war everywhere, are beginning to get hit with the boomerang of their stupid economic sanctions against Putin’s Russia. A few days ago, Russia’s largest oil company, state-run OAO Rosneft, headed by close Putin ally, Igor Sechin, announced discovery of a giant new oil field in Russia’s Arctic north of Murmansk. The stupid part comes from Obama’s decision to agree to impose sanctions on Sechin and his company and to prohibit US companies from doing business with them.
On September 27, in a joint announcement, Rosneft and US oil giant, ExxonMobil announced discovery of a huge new oil deposit, the Universitetskaya-1 well in the Kara Sea. For more than two decades Russian oil companies had dreamed of tapping what they believed were huge oil deposits in the Arctic. In 2011 the CEO of ExxonMobil, the largest of the US giant oil companies and the heart of the original Rockefeller oil group, signed a joint venture agreement with Sechin’s Rosneft to drill in the Russian Arctic. Universitetskaya-1 flow data suggests a discovery of between 750 million and one billion barrels of high-quality sweet, light crude oil, worth between 7.5 trillion and 10 trillion dollars at today’s price.
The Kara Sea find is only the first in a region that experts say has the potential to become one of the world’s most important crude-producing areas, bigger than the Gulf of Mexico. Estimates are that the exploration region of Rosneft in the Kara Sea, Universitetskaya, the geological structure being drilled, is the size of the city of Moscow and large enough to contain more than 9 billion barrels of oil. The first well was the most expensive in ExxonMobil history, costing some $600 million to drill. In a great understatement, Sechin told the press, “It exceeded our expectations. This discovery is of exceptional significance in showing the presence of hydrocarbons in the Arctic.”
Discovery of huge oil reserves in Russia’s Kara Sea northeast of Murmansk give a major boost to Putin’s energy geopolitics and a huge defeat to Washington and ExxonMobil
Sechin said that production of oil from the Kara Sea field could begin within five to seven years. The field discovered would be named “Victory.” There is more than a little irony in that name. Because of the economic sanctions drafted by the US Treasury Undersecretary for Terrorism and Financial Intelligence, David S. Cohen, as of October 10, ExxonMobil will be forced to withdraw from the Russian project and incur huge losses or violate the US Government sanctions and face severe penalties. The Obama Administration has just scored an own goal (Eigentor?) with its brilliant new precision financial and economic warfare unit inside the Treasury Department. Bravo, Washington! You have just inflicted major damage on one of the largest corporations in the United States. When ExxonMobil did the deal with Rosneft, it gambled that the Arctic region, the world’s greatest unexplored potential oil region, could be the company’s salvation in terms of assuring long-term crude supplies. The gamble proved correct and did so just as the stupid Obama Administration bureaucrats imposed sanctions on Sechin and the Arctic project they intended to damage Russia.
Rosneft now looks to China
Now with ExxonMobil and most likely MorganStanley as the financing agency to organize the billions needed to expand the drilling next spring, banned by US sanctions, Sechin is turning east to China. Conveniently for Rosneft, ExxonMobil is forced out just after finishing the most complex and difficult part of the project.
On September 1, President Putin personally told the Chinese that he approved Chinese state oil companies taking a financial stake in a major onshore subsidiary of Rosneft, Vankor. It will be the largest Chinese equity deal in a Russian oil company to date. Until the Ukraine crisis and sanctions, Russia had jealously limited foreign share-holding in its state-owned oil and gas companies. That deal deepened the growing energy ties between China and Russia, ironically, the opposite result of what Washington geopolitical Eurasia strategy is intended to achieve.
As US strategist Zbigniew Brzezinski declared in his 1997 book, The Grand Chessboard, US geopolitical policy must be to prevent at all costs a unified Eurasian economic challenge to American global hegemony. Oops, Obama, you may well have done the opposite. That’s what’s quite stupid—you failed to think through the complete consequences and interconnectedness of your actions.
F. William Engdahl is strategic risk consultant and lecturer, he holds a degree in politics from Princeton University and is a best-selling author on oil and geopolitics, exclusively for the online magazine “New Eastern Outlook”