It is unlikely that peace in Ukraine can lead to great Ölinvestitions in Russia

Although there are many headlines about the possibility that the USA will invest in Ukraine and/or Russia as part of a peace agreement, the reality on site is much less hopeful. First and foremost, the Ukrainian deal would be not very useful, since the country only has oil and gas and the resources for rare earth are not very significant. It is even more important that the idea of ​​US mining operations on or near the border between Ukraine and Russia, in particular on the board, exists with its occupied Ukrainian territory in order to hardly calculate most private companies.

On the other hand (and although I'm not a real economist, I have two hands), the oil industry has long invested in dangerous places and handled with political risk. Of the tsarist Russian Caspian operations that Josip Dzhugashvili (later Joseph Stalin) invested during his career as a political activist at the beginning of the 20 in Persia^TH Century, the industry has a long history where the oil is and accepts the political risk that every project brings with it. And although western oil companies have lost billions when their Russians were abandoned or confiscated after the Ukrainian War began, it does not mean that they will not return.

Part of the problem is based on the short memories of the industry, in which governments that often reduce contracts and even open their own petroleum laws do this, do this, but with the knowledge that they find someone who develops when they have oil reserves. Iraq, Iraq, Libya and Venezuela have private operators at various points and have unilaterally changed the conditions of existing contracts, but they not only attracted new investments, sometimes the same companies returned.

Admittedly, both Russia and Ukraine have a desperate need for foreign funds and technologies, and this certainly gives the scales in favor of potential investors. I often quote the case of Angola, which from 1975 was mostly a benign investment environment for the foreign oil industry, since the country only had minimal financial resources and almost no technical know -how in the event of independence. Compared to the Canada of the 1970s with a democratic government and a strong tradition of the in-laws, but Prime Minister Pierre Trudeau was as nationalistic as many Opec nations to remove allegedly malicious foreign interests in the country's oil sector with which he meant American companies.

There are two specific reasons to return to Russia. First, there will be stigmatization that is associated with foreign investments that are accepted under pressure from the West. Even in the United States, the contracts signed under compulsory are often lifted by the courts. In the future, if the Russia's economy is more stable, it is almost certain that the government revises the conditions for an oil concession.

Secondly, the in-law government does not provide complete immunity towards political attacking them through its Dabhol project, but the lack of in-law elements increases the political risk. Having oil operation in Russia means trusting: a) the next US administration does not reject sanctions; b) Putin will not take any political steps that lead to new sanctions. c) Putin will not nationalize the company as part of the desire to set up control over the industry. d) Putin does not use the company (and the associated staff) because hostages should occur new disputes. And finally e) Putin's successor will honor his business.

In order to repeat yourself, there is primarily gambling in the industry that accept political risk, that you can make a good profit before the political environment goes south. However, this can be defeated itself, since it means that companies want a high return before their investment, and this could trigger a nationalist counter reaction.

Probably the better approach will be to accept business that have a short shelf life or involve minimal capital in Russia, e.g. B. Service contracts for field development or maintenance. Long-term development projects such as in Russia's (small) offshore oil sector should be avoided as the greatest risk.

Peace in Ukraine will probably be the result of a war fatigue of the two combatants, but to the extent to which a contract enables the foreign development of resources, this is probably a secondary employment, regardless of the wishes of various leaders. In view of the fact that President Trump himself was able to encourage the oil sector to increase the investments in the United States, it seems unlikely that the industry will follow the siren song with plenty of but risky resources in Russia.