To Russia With Hope

Conoco Oil Corp. spent 18 anxious months dickering with federal and local Russian officials to win approval in 1991 for its Polar Lights oil project near the Arctic Circle. By contrast, it turned out to be an unexpected snap to win loan guarantees and investment insurance from the U. S. Overseas Private Investment Corp. In a welcome surprise to Conoco officials, President Clinton included $150 million in OPIC funds for the oil giant in the $1.6 billion aid package he offered embattled Russian leader Boris Yeltsin at their Apr. 3-4 Vancouver summit.

Clinton's aid wasn't much, considering Russia's economic morass. But that wasn't the point. The summit's chief value was to prime the pump for a package of multilateral support, perhaps as much as $30 billion, that may be hammered out at a meeting of the Group of Seven's foreign and finance ministers in Tokyo on Apr. 14-15. Washington also is readying $2 billion in financing from the Export-Import Bank of the U. S. to help Russians buy U. S. oil equipment and to nurture Russian startups.

But Western investors aren't going to flock to the former communist superpower until the political stalemate in Moscow is resolved. That's why one aim of the Clinton aid package is to boost Yeltsin's prospects in a crucial Apr. 25 referendum on whether he or Russia's conservative legislature should have more say in government. Should Yeltsin win a sizable mandate, the way would be paved for changes in Russia's constitution and Parliament, making it easier to create a modern set of laws. That could stem the chaos and create a more stable business climate.

Currently, bureaucratic and tax obstacles hobble most attempts by Western companies, especially oil companies, to do business in Russia. "There's plenty of private money available, but it's not going to go in when conditions change every week," says Gilles Labbe, president of Anglo-Suisse in Houston, a partner in the White Nights oil project in Siberia. That operation has been hamstrung by the chief woe of U. S. oil executives: Russia's stiff $5.50-per-barrel oil-export tax above royalties.

CRITICAL START. Western leaders hope that their financial sweeteners will produce at least some short-term stability in Russia. The G-7 multilateral package is a critical start. That package could also free up a $6 billion fund to stabilize the ruble, which so far has been blocked because Russia can't meet monetary requirements set by the International Monetary Fund. "IMF money will have to be on conditions that are not as rigorous as normal because the Russians can't go that far," argues Robert Hormats, vice-chairman of Goldman Sachs International.

Clinton's Vancouver pledge is likely to loosen up additional bilateral aid from Europe and Japan. "This is a new ball game," says a senior European diplomat. "Europe won't want to let the Americans get too far out ahead" in a matter so close to home. U. S. officials think Japan, which had been dragging its heels because of a territorial dispute with the Russians, may be next.

Aid that promotes political stability can't come too soon for U. S. oil executives, who see big opportunities in Russia's bountiful oil patch. "There doesn't seem to be malice--just massive bureaucracy and uncertainty as to who has the final say," notes Conoco President Constantine S. Nicandros. His company has already been burned. Last year, Conoco had a preliminary agreement from the Russian government to help develop the huge Shtokman oil field east of Archangel. After Conoco and its partners invested $20 million, the government awarded the rights to a Russian consortium that includes military industries.

To help break the petroleum gridlock, Clinton won Moscow's agreement in Vancouver to set up a joint commission headed by Vice-President Al Gore and Russian Prime Minister Viktor Chernomyrdin. That--and aid--will help Russia. But in the end, only the Russians can sort out their problems.