Robert Amsterdam

Today the Wall Street Journal is running a comment on the latest energy hustle in Russia against France's Total.

Sergei Stepashin is refreshingly honest about about Total's "environmental" violations

A Total Mess January 25, 2007

Surprise, surprise: The Kremlin has accused another foreign oil major of "environmental" violations that just might lead to the renegotiation of a billion-dollar contract signed under the previous regime in Moscow. One day, Western investors may realize that the incredible returns in Russia may be too good to be true.

This time, France's Total stands accused of ecological harm at the Kharyaga oil field, a project in the Arctic in which it owns a 50% stake. (Norway's Norsk Hydro owns 40% of the venture, with the rest belonging to a smaller Russian firm.)

Unlike when Royal Dutch Shell saw its Sakhalin-2 deal scuppered in December, Moscow didn't bother with an actual environmental agency to make the accusations. Instead, word came Monday from Sergei Stepashin, head of the federal Audit Chamber. According to Russian news reports, Mr. Stepashin wasted little time in identifying the Kremlin's real beef with Total: that the company's missed deadlines and production shortages have "cut into [government] revenues." Throw in that Kharyaga is the rare energy project left in Russia not controlled by a Russian company, and Total was obviously a sitting duck.

And thus has yet another bird come home to roost. Remember that foreign firms and investors showed comparatively little concern about the shortcomings in Russian rule of law back when only oligarchs like Yukos founder Mikhail Khodorkovsky were seeing their wealth confiscated. Russia's foreign investors were never the ideal lobbyists for private-property protections and other democratic and free-market institutions, given they way they'd profited from the country's Wild East economy. Now they know a little better how Mr. Khodorkovsky felt.

Click here for more information on Kharyaga.