Summit Dreams for Siberian Oil Town

KHANTY-MANSIISK — For the next few days, this small town deep in a Siberian forest will bask in the spotlight as European and Russian officials try to move their stalled partnership forward.

Regional leaders hope the Russia-EU summit, which opens Thursday evening, will lead to more foreign investment. Beaming local residents, meanwhile, insist that the choice of their town, some 2,700 kilometers east of Moscow, to host the event is no surprise.

"Khanty-Mansiisk is the center of the universe today," said Yeremei Aipin, deputy speaker of the regional parliament and a writer of Khanty origin.

Such a notion may be in part shaped by a local legend that a great flood covered the whole world, and life returned on Samarovskaya Mountain, a sacred site for the region's two main indigenous groups, the Khanty and the Mansi, Aipin said.

But when Aipin and other officials speak of Khanty-Mansiisk's significance, they also use hard facts.

The region accounts for about 40 percent of the country's oil exports and pumps 7.5 percent of the world's oil, while its taxes account for almost a quarter of federal budget revenues, according to officials' estimates.

"The world depends on us now," Aipin said.

The choice of this boom town, located in forests and swamps at the confluence of the northern rivers Ob and Irtysh, is perhaps meant to showcase the country's newfound wealth — and its increased bargaining power as the price of oil keeps climbing.

"This is the starting point of those power streams that flow to Europe so that the bulbs there can light up," Governor Alexander Filipenko said Wednesday, touting his region's oil and electricity industries to foreign and Russian reporters.

There is so much oil that the current extraction volume of 280 million ton a year will last for another 15 to 20 years, Filipenko said, dismissing suggestions that the oil will dry up. "You won't see that. Our children and grandchildren will extract it too," he said.

Khanty-Mansiisk stands in stark contrast to many gloomy towns across the country: Recently built low-rises line its small, tidy streets, and the local government is working with celebrity architects Norman Foster and Eric van Egeraat to build skyscrapers and expand the town further. But signs abound that Khanty-Mansiisk has been graced by energy wealth after years of despair and Soviet-era reliance on prison labor. Some of its old wooden barracks have been razed, others have been covered with metal sheeting ahead of the summit. A monument to victims of political repressions has been erected in a quiet corner where a wooden barrack once stood — a notable move for a country that does not like to dwell on its painful past.

Although Governor Filipenko insisted that a sharp drop in oil prices would not affect the regional economy, he said his administration was working to diversify away from hydrocarbons. The region wants non-oil sectors to account for half of the region's economy in the next decade, he said, adding that his administration was focusing on research and development and education.

Officials said this was where the EU could step in to help. The summit is expected to address energy cooperation between Russia, which is not rushing to open up its energy sector but urgently needs expertise and technology, and the EU, which wants greater access to the country's oil and gas. The EU wants to spell out conditions and terms of cooperation in the new partnership agreement, while Russia would prefer a framework document. "There is a number of technologies related to oil extraction that we lack," Filipenko said.

He noted that there was a lot of room to expand cooperation between his region and Europe. Annual direct investment into the region stands at 10 million euros, accounting for 60 percent to 65 percent of investment needs.

Aipin, who heads a group representing indigenous peoples in the regional parliament, spoke in favor of offering more access to foreigners in exchange for modern technologies. But he insisted that the state should continue to closely watch the process. Aipin, a writer whose books have been translated into French, German, Finnish and English, dismissed the notion that the country was using its hydrocarbon resources as a political tool, instead calling it "an element of intellectual influence."

His top concern, however, is that indigenous peoples will some day begin receiving a share of the profits from oil companies operating on their land. The companies currently support the 30,000 Khanty and Mansi people, but the support accounts for a "ridiculously small percent" of their profits, Aipin said. Big oil operators in the region include LUKoil, Surgutneftegaz and Rosneft, whose local assets once belonged to Yukos.

Many people in the streets speak favorably of the administration led by Filipenko, who insisted Wednesday that he welcomed criticism and learned from it.

A local newspaper, My City Without Censorship, won a freedom of speech award from the German-based ZEIT Foundation earlier this year together with Moscow-based Novaya Gazeta.

Among the preparations for the summit, the authorities have sprayed the forests with chemicals to kill mosquitoes — which are notorious here in summer — and other insects like ticks. The forests are sprayed every year from May to September, but they are getting special attention in the run-up to the summit. Officials admit, however, that even though they can guarantee high security for summit participants, they cannot protect them from mosquito bites.

"We are trying to spray, but you must understand that this is Siberia and these are swamps," said Alexander Kolesnikov, deputy director of the hotel Yugorskaya Dolina, where European Commission President Jose Manuel Barroso, EU foreign policy chief Javier Solana and possibly President Dmitry Medvedev will stay.

Sitting on a riverbank and surrounded by a forest, the hotel will put up some 200 guests. Five cottages have been built in the forest for the leaders and their entourages. Located a 10-minute ride from the town, the hotel — whose main building is built in the shape of a chum, a teepee-like structure where Northern peoples live — has its own cabaret, archery range and pheasant hunting grounds.

In early March, then-FSB director Nikolai Patrushev hosted a conference of 50 foreign intelligence agencies in Khanty-Mansiisk. It might have been then that the hotel passed muster. "They have done some probing, to put it mildly," Kolesnikov said.

The summit itself will be held in a concert hall in the city center. A festival will follow on Saturday.