Washington — US President Donald Trump and Russian President Vladimir Putin will meet July 16 in Helsinki for one-on-one talks designed to ease tensions between the two countries. While analysts see Ukraine, Syria and the Iran nuclear deal as likely topics, they are not ruling out the possibility that US energy-sector sanctions or Russian oil production will be part of the discussion.
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Neither the White House nor the Kremlin has released a concrete agenda.
Analysts are closely watching the summit for unexpected outcomes like Trump's impromptu offer last month to suspend annual military drills off the Korean Peninsula at the request of North Korean leader Kim Jong Un during their one-on-one meeting in Singapore.
"I worry that he doesn't listen to the secretary of state or his team and that he will make a unilateral concession like he did with the 'war games' with South Korea, which was unfortunate," former US Secretary of Energy Bill Richardson said in an interview on Monday's Platts Capitol Crude podcast.
White House advisers are pitching the Helsinki meeting as a chance to cool tensions between Washington and Moscow.
"I wouldn't underplay at all the importance of actually sitting down for the first time in a meeting, a summit environment, and discussing the issues that really matter most," said Jon Huntsman, US ambassador to Russia, during a White House briefing last week.
Here's a look at the oil and natural gas issues potentially at stake:
OIL SANCTIONS AND SUPPLY
While there is little indication that Trump will consider offering to weaken or even lift Russian energy sanctions during the meeting, analysts said such a deal cannot be ruled out after the Singapore summit with Kim.
Daniel Fried, an Atlantic Council distinguished fellow and a former special assistant and National Security Council senior director for Presidents Clinton and Bush, speculated that Putin may float a deal to boost oil production in order to dampen market prices, in exchange for some sanctions relief.
"This is low gain, high risk," he said.
Trump has demanded on Twitter several times that OPEC increase oil production to ease prices, which have remained in the high $70s/b despite an agreement by OPEC and non-OPEC allies to increase production by up to 1 million b/d. Saudi Arabia and Russia have the bulk of the world's current spare capacity.
Elizabeth Rosenberg, director of the energy program at the Center for a New American Security in Washington, said she would be surprised if Trump and Putin do not talk about the role that Russia can play to add more oil supply to the market, given its ability to do so.
"I don't see why Putin wouldn't play this to his utter advantage as a marketing opportunity," she said.
SANCTIONS AREN'T SQUEEZING RUSSIAN OUTPUT
Western sanctions have not yet hit Russian crude production and export volumes. Output volumes only dropped when Russia signed up to a deal with OPEC to reduce crude production.
The sanctions do not target Western companies' involvement in projects that were already producing oil and this has allowed key projects involving Western investment to continue as normal. This includes ExxonMobil's involvement in Sakhalin 1, Shell's in Sakhalin 2, Total's in Kharyaga and most of BP's cooperation with Rosneft.
Furthermore, Russian producers have coped well with the limitations on access to Western financing and technology. They have done so by successfully securing new investment from Asian partners, developing domestic services capabilities, and benefiting from the collapse in the ruble to keep costs low.
However, there are fears that sanctions will impact Russian production, and by extension exports, in the mid- to long term.
Before sanctions were introduced, Russian companies, particularly Rosneft, had signed major deals with Western companies to develop frontier oil reserves. They hoped to capitalize on Western financing and technical expertise to bring Russia's most challenging oil to market.
It is these longer term, complex projects, which Western majors have withdrawn from as a result of sanctions. Many analysts believe that while oil price volatility over the last few years would likely have stalled progress at these costly projects in any case, sanctions were a further blow.
PROJECTS THAT STAND TO BENEFIT
Russian commercial projects that stand to benefit most from a softening or lifting in sanctions cover deepwater, shale, and Arctic offshore oil reserves -- in particular, those that Western companies have already expressed an interest in, including Rosneft's Kara Sea project, which initially involved ExxonMobil, before it was forced to withdraw due to sanctions.
Other companies have suspended some of their offshore activities due to sanctions, including Eni, which was drilling in the Black Sea with Rosneft. Some Western majors including Total, Shell and BP had also signed preliminary agreements to explore and develop shale oil reserves with Russian partners, which could be back on the cards if the restrictions are lifted.
Russian LNG production and export volumes have not seen any material impact from the US sanctions so far.
While Russia's first LNG plant, within the Sakhalin 2 project, has operated since 2009, with the production being marketed under long-term contracts, the country's second LNG project, Yamal LNG, was commissioned in late 2017.
And even though Novatek, which leads Yamal LNG, saw limits to its ability to attract money for its project, it successfully resolved the task, inviting Chinese partners to the project, it addition to its initial partner, France's Total.
The first 5.5 million mt/year train of Yamal LNG was launched in late 2017 and the partners now plan to launch two other trains, each with a similar capacity, ahead of initial schedule. The second train is expected to be on stream in September/October, and the third train will launch in early 2019.
US CONGRESS WILL HAVE FINAL SAY
Any sanctions relief Trump may offer is complicated by the Countering America's Adversaries Through Sanctions Act, which Congress overwhelming passed last summer. The bill prevents sanctions on Russia from being terminated or waived without congressional review.
"It does not allow for the administration to unilaterally weaken sanctions or delist companies," said Fried. "So I think it would be difficult, not impossible, but difficult, for [Trump] to offer to lift or weaken energy sanctions without Congress."
Trump signed the bill into law on August 2, 2017, while calling it "seriously flawed."
Rosenberg, a former sanctions adviser at the Department of the Treasury during the Obama administration, said the law will rein in any promises Trump makes on easing Russian sanctions.
"He can only offer relief from sanctions measures if he's utterly confident that Congress won't block him with a supermajority," she said.
-- Brian Scheid and Meghan Gordon, with Nadia Rodova and Rosemary Griffin in Moscow
--Edited by Keiron Greenhalgh, email@example.com