Crisis could open Russian energy to West again

By Amie Ferris-Rotman

MOSCOW (Reuters) - A decline in output of Russia's star asset, oil, could provide a rare opportunity for foreign firms to gain more access to its energy sector, even though the sting of Moscow reneging on previous deals still hurts.

Speaking at the World Economic Forum last week in Davos, Prime Minister Vladimir Putin surprised investors by calling for "mutual access" to energy assets to boost greater energy security. He added Russia should not revert to "isolationism".

Analysts said that the weight of the global financial downturn could soften resource nationalism.

"At least for 2009, or as long as this crisis persists, the problem will lead to a controlled opening (to the West)," Cliff Kupchan, Director of Europe and Eurasia at Eurasia Group, told Reuters.

"Let's not forget that PSAs (production-sharing agreements) were granted in times of weakness," he added, referring to contracts signed between the then-indebted government and cash-rich foreign energy firms in the 1990s.

Russia has since said it will not issue any more. But striking a rare note of reconciliation, Putin told Davos that Russia remains open to foreign investment. Energy security should come from mutual interdependence and "the exchange of assets without any double standards," he said.

With a steadily devaluing rouble, a reserve pile that has shrunk by a third since August, and cash-strapped Russian oil and gas firms, Russia could let Westerners back in the game.

A senior executive at a western oil firm that operates in Russia told Reuters on condition of anonymity that majors are more likely to look at buying smaller oil companies which are facing financial difficulties.