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Putin’s Energy Trumps U.S. Sanctions as Rosneft Extends Reach

One by one, executives from some of the world’s largest energy companies climbed the dais to sign accords with OAO Rosneft chief Igor Sechin as Vladimir Putin stood behind his blacklisted ally, nodding approvingly.

Executives from BP Plc, India’s Oil & Natural Gas Corp. and companies from Norway, Abu Dhabi, Venezuela, Vietnam, Cuba and Mongolia all signed deals at Sechin’s table on the last day of the St. Petersburg International Economic Forum. Putin has pointed to energy deals to show that U.S. and EU penalties imposed over his actions in Ukraine have little consequence.

“It’s pure foolishness for countries to talk about cutting their energy dependency on Russia because that dependency can never be one-sided,” Putin said. “It’s always a case of mutual dependency and that means it increases reliability and stability in the global economy and in energy.”

Exxon Mobil Corp., the largest U.S. oil company, went ahead with a deal to deepen its ties with Rosneft yesterday, even after the Obama administration urged American CEOs to skip Putin’s annual economic showcase. Exxon sent Neil Duffin, head of the Irving, Texas-based company’s development unit, to sign an accord with Sechin that involves drilling for crude in the Arctic and Siberia and liquefying natural gas for export.

BP signed its first accord with Rosneft since the Moscow-based company’s $55 billion acquisition of BP’s TNK-BP venture with a group of billionaires last year. BP, based in London, agreed to $300 million of financing for a joint development of deposits near Kazakhstan.

Venezuela, China

Sechin also agreed to prepay $2 billion to Petroleos de Venezuela SA for future deliveries of crude and oil products.

The deals cap a week in which Russia’s other dominant state energy company, OAO Gazprom, struck a historic $400 billion accord with China to supply natural gas for 30 years.

That agreement, signed in Shanghai after more than a decade of negotiations, will turn China into Russia’s single largest gas customer, Putin said yesterday. Gazprom currently has about 30 percent of the market in Europe, half of which is supplied via Ukraine.

Putin said the China gas project will help steady Russia’s $2 trillion economy. The standoff over Ukraine, including the annexation of Crimea in March, sparked capital outflows and hurt the ruble, pushing the economy to the brink of recession.

China agreed to pay $25 billion up front to help Gazprom finance the $75 billion it will cost to build a pipeline from eastern Siberia to the Chinese border and develop the fields to fill it. Putin said the project will be a boon for Russia’s entire Far East region.

“I want to stress that this will be the world’s biggest construction site,” Putin said.

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