Abstract
This article discusses the relationship between the private international oil company (IOC) Royal Dutch Shell and Russia as an oil producing and oil exporting state during a period when oil prices were moving towards unforeseen heights (2005-2007). By examining this dynamic relationship, this study aims to contribute to an understanding of Russia’s discursive and culturally produced history. The history of a state-oil company interaction has shown that the use of legal instruments is a good indicator to determine the nature of the relationship between oil-producing states and IOCs – a relationship that often has been characterized by periods of cooperation or conflict.At the centre of inquiry is how the oil major understands the law in Russia, and in particular the enforcement of the country’s formal written rules during legal conflicts over the development of the Sakhalin-II oil and gas fields (in which Shell until December 2006 controlled a majority stake). After identifying the violations of formal laws, I conclude that Shell understands that the formal rules of the game are subordinate to the unwritten laws of energy politics and in particular the informal demands of contemporary Russian society. The article also illustrates that oil-producing states have the upper hand in conflicts over the development of oil and gas resources.
Highlights
What do Norwegian salmon, chocolates from the Ukraine, Georgian wine, Dutch potatoes and Polish apples have in common? They all fail to meet Russian health and safety regulations and have been prohibited from entering the Russian Federation for a particular period of time
While the Russian state is the centre of inquiry in many of these works – whether in terms of the development of the country’s legal system or as confident energy power seeking to increase its profits – the main objective of this study is to illustrate the viewpoint of foreign oil companies operating in the petroleum sector in Russia
After identifying the violations of Russian law during Shell’s operations in the previous section, below I discuss how the company reacted to law enforcement practices, conducted by Russian enforcement agencies – or in other words, how accusations and sanctions from the Russian authorities were interpreted by the foreign oil major
Summary
What do Norwegian salmon, chocolates from the Ukraine, Georgian wine, Dutch potatoes and Polish apples have in common? They all fail to meet Russian health and safety regulations and have been prohibited from entering the Russian Federation for a particular period of time. I will analyse the strategies taken by Shell in response to the sanctions imposed on them by Russian law enforcement authorities By identifying these strategies, I aim to examine how the Anglo-Dutch oil major understood enforcement mechanisms and regulatory pressure (the threat to impose sanctions) when they conducted their operations in Russia during a particular period of time. The history of a state-oil company interaction has shown that the use of legal instruments is a good indicator to determine the nature of the relationship between oil-producing states and IOCs. The objective of this case study is to contribute to the debate on the challenges that IOCs face when they operate on the Russian territory and to increase our knowledge of how actors (individuals and organizations) understand law enforcement practices in Russia. A decade later or so, these deals were considered unacceptable as oil prices rose to historic records during the 2000s, with the inevitable result that the seed for a potential conflict had been sown.
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