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. Last Updated: 07/27/2016

President Hints at a Shtokman Reversal

President Vladimir Putin and two senior state officials reopened the possibility of foreign energy majors taking part in the Shtokman gas project, signaling that Gazprom might soon reverse its decision to bar them from developing the giant Arctic field.

"The issue [of Shtokman] is not closed," Putin said in an interview posted on the Kremlin web site Friday. "It can be looked at again if foreign partners present interesting proposals."

His comments prompted speculation that the selection of foreign partners for Shtokman could, after all, have been linked to negotiations with the United States on Russia's entry to the World Trade Organization. Spokespeople for the Kremlin have previously denied the existence of a direct link between the two issues.

The United States signed its bilateral WTO deal with Russia on Nov. 19 in Hanoi, Vietnam, where Putin was meeting with U.S. President George W. Bush.

Gazprom's announcement in early October that it had rejected all five foreign bidders for Shtokman prompted widespread shock and skepticism in the global oil and gas industry. Many doubted Gazprom was capable of developing the huge gas field, its first offshore, on its own.

In separate statements, Putin and Industry and Energy Minister Viktor Khristenko reiterated Gazprom's argument that the equity swaps offered by the five short-listed companies -- U.S. oil majors ConocoPhillips and Chevron, France's Total, and Norway's Statoil and Norsk Hydro -- were inadequate.

"The possibility still exists to attract partners to work on different parts of the project as contractors and possible participants," Khristenko was quoted by Russian news agencies as saying.

"But the format [of the talks] will be different," he said, providing no further details.

Putin's economic adviser, Igor Shuvalov, whose reported comments on a trip to Washington in April first sparked the controversy over a possible link between Shtokman and the WTO deal, also appeared to indicate a shift in the Kremlin's position.

On Thursday, Shuvalov, speaking again in Washington, said: "Shtokman will be developed together with foreign companies."

He added: "Gazprom will be the sole holder of the license, but it won't be able to develop the deposit on its own."

Insiders said the WTO deal could be prompting a change of heart by Russian officials.

"Although the political relationship is still somewhat testy, we have overcome the hump of the WTO bilateral," said Andrew Somers, president of the American Chamber of Commerce in Russia.

"The door is opening up to foreign companies, and to U.S. companies specifically," he said, referring to the Shtokman project.

Shuvalov said in April, ahead of the Group of Eight summit in St. Petersburg, that the chances for foreign companies to participate in Shtokman were linked to the WTO agreement.

The latest comments by Putin and his officials contrast with Gazprom's stance in October, when CEO Alexei Miller told Russia Today state television that foreign companies would only be welcome as contractors, not equity partners.

A Gazprom spokesman said Friday, however, that the company's position had not changed since October. "We've already said what Khristenko said today," the spokesman said.

A spokeswoman for Statoil said the Norwegian company would only enter the project if it had a stake in it. Officials at Chevron have previously said the same thing.

"If there is a new opportunity for participation as an equity investor in the Shtokman license, that is obviously of interest to Statoil," spokeswoman Rannveig Stangeland said by telephone from Oslo. "We are waiting for further information from Gazprom."

Total's spokeswoman in Paris, Patricia Marie, sounded a more cautious note, indicating the increasing fragility of the investment climate in Russia.

"We are always interested to enter many projects worldwide, but it depends on conditions too," Marie said by telephone. "We didn't receive any notification when we learned we were no longer being considered for the project and we haven't received anything now."

Many observers expected Gazprom to take on a European partner to develop Shtokman after announcing in September that it would divert most of the field's output as natural gas to Europe. The original plan would have seen the bulk of output shipped as liquefied natural gas to the United States.

The original decision to exclude foreigners from Shtokman -- coming on the eve of a trip by Putin to Germany -- was a political decision meant to scare Europe into accepting Russian investment, said Chris Weafer, chief strategist at Alfa Bank. "These [officials'] statements show there is an ongoing debate with Europe over energy security. The Europeans are looking for energy security, whereas Russia is looking for economic partnership," he said.

Moscow hopes Europe will lift objections to Russian investment in various sectors, from aviation to technology, and in return Russia will allow Europeans to take equity stakes in strategic natural resource projects, he said. Weafer added that Russia needed foreign companies to develop the field, which lies in extremely difficult conditions under the Barents Sea about 550 kilometers off the Russian coast. It is estimated to hold about 3.7 trillion cubic meters of gas.