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. Last Updated: 07/27/2016

Foreign Oil Firms Gloomy About Potential for Reform

Russia's reformist cabinet may give a new thrust to economic changes, but foreign oil majors with energy deals already mired for years by political bickering said they were unlikely to see direct benefits soon.

"Reforms to other sectors will be tardy in hitting the fuel and energy sector," said a senior Western energy executive. "It's probably due to the value and strategic significance of the sector. They may want to leave well enough alone."

Western and Asian oil companies plan around $60 billion in direct long-term investments in greenfield projects in Russia, the world's third largest crude oil producer.

But the deals hinge not on the cabinet, but on an unruly parliament which has blocked essential legislation.

Russia has had a production-sharing law for more than 15 months. But most major deals are delayed because the law still lacks elements required to make it function and legislators have not decided which reserves to open for production.

Oil executives are gloomy despite the appointments of reformers who will dominate government economic departments. Anatoly Chubais, who masterminded Russia's privatization program and is now first deputy prime minister in charge of the economy, was the brain behind the reform-minded Federal Energy Commission. The commission has yet to get off the ground but seeks to inject market-economy principles into the energy sector, like fair access to oil export pipelines.

"Probably the FEC will come more to life," the Western executive said. "That's the sort of institution that gives some comfort to investors."

But the commission currently is at loggerheads with the Fuel and Energy Ministry, which survived the Kremlin reshuffle, possibly because Prime Minister Viktor Chernomyrdin made its preservation a condition of staying in the government, an oil analyst said.