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. Last Updated: 07/27/2016

Minister Tells Oil Barons a Fable

What do you say to an entire club of powerful energy barons in the midst of one of the most prosperous oil periods in history?

If you?re Deputy Prime Minister Viktor Khristenko, you talk about elephants and rodents.

Opening his speech to the Moscow International Petroleum Club on Wednesday, Khristenko told executives from many of the biggest oil and gas companies in the world that Russia?s fuel and energy complex was like a giant elephant that he doesn?t know very well.

He was telling the parable of the three blind mice, each of whom holds a different part of the same elephant ? trunk, leg and tail ? and each comes up with a different conclusion for what the animal must be.

Khristenko didn?t liken himself to the mouse holding the tail, who thought the elephant was a twig. Nor did he liken himself to the one holding the trunk, who was convinced it was a big flexible tube. He compared himself to the mouse who thought the elephant?s leg was a column holding up the entire heavens.

"I hold the leg and would like to know about the other parts of the elephant," he said.

And with that, the oil and gas giants told him.

British Petroleum vice president Anders Morland said his company?s dream includes completing a 4,500-kilometer pipeline to China and participating in the giant Sakhalin projects. "For the dream to become a reality, some very important measures need to be taken," he said.

Morland was referring mostly to the government?s policy on production sharing agreements, or PSAs. Establishing PSAs are the top priority of foreign oil and gas firms waiting to invest in Russia, he said.

In reply, Khristenko said that "all dreams finished once [President Vladimir Putin?s] government formed" and "harsh reality" began, referring to the passing of responsibility for PSAs from one ministry to another. "The PSA law should make negotiations timely, well organized and predictable," he said.

Zarubezhneft deputy general director Oleg Popov complained that the Russian Federation is owed money by more than 100 countries around the world that have proven oil reserves, and asked if the government was going to do anything to collect.

"So, will the government soon be creating join ventures and inculcating [these countries] about the size of their debts? Popov asked. "None of our private companies can resolve this problem ? it can only be resolved at the external, state level."

"To answer that question," Khristenko said, "we must first solve the problem with the Paris Club," to which Russia owes billions of dollars.

"There are two aspects to our participation in the Paris Club. First, Russia is a creditor country. Secondly, Russia is a borrower. The more debts [Russia] maintains to restructure, the more freedom Russia has to work out the debts of creditors," he said.

Next came Gazprom.

Yelena Karpel, the gas monopoly?s first vice president, harped on export duties and tariffs. "There is not enough pipelines," she said.

Gazprom didn?t have enough money to invest in new pipelines because tariffs are too high, she said.

"I do not have good news for you," said Khristenko. "This process will continue until the gap between domestic and international prices is closed."

As the meeting was winding up, State Duma Deputy Vladimir Medvedev called for the Fuel and Energy Ministry to retain control of PSAs, which was recently given to Economic Development and Trade Minister German Gref.

As well as being a Duma deputy, Medvedev is also an honorary member of the Moscow International Petroleum Club ? along with U.S. Congressman Curt Weldon, former U.S. Treasury Secretary Lloyd Bentsen and former Ambassador Robert Strauss.

The club was set up in 1995 by the Russian government, replacing the Russian-American Petroleum Club, which was formed with support of the Gore-Chernomyrdin Commission. Ex-Gazprom boss and former Prime Minister Viktor Chernomyrdin is the first name listed on the club?s list of honorary board members.

The club unites more than 30 major oil and gas companies in Russia, the United States and Western Europe, including BP, British Gas, Exxon, Ruhrgas, Shell, Texaco and Total Fina Elf. It has a representative office in Washington and claims close contacts with the major governments of its members.

The club?s motto is: "From rivalry to partnership and interaction!"