The Middle Eastern expansion of Tatneft

Tatneft’s activities in the MENA region (Credits: mapchart.net)

by Riccardo Allegri

In the last few years, the Russian company Tatneft has expanded its business in the MENA region. Its roots in the Tatarstan Republic make it a perfect tool in the hands of the Kremlin, which wants to balance the Western influence in the area.

According to a press release published on the Tantneft official website in April 2021, an Iraqi delegation headed by the Minister of Oil, Ishan Abdejabbar Ismael, paid a visit to the company headquarters and some of its facilities. It was a decisive step to improve the relationship between one of the most important Russian assets in the field of fossil fuels and Baghdad, which acquired increasing attention from the Kremlin over the last few years.

During that meeting, Albert Karimov, Deputy Prime Minister of the Republic of Tatarstan, presented to his Iraqi counterparts the company competencies in oil services. This fits perfectly within the corporate development strategy aimed at expanding Tatneft’s turnover in the MENA region. Moreover, the company has a longstanding business relationship with Iraq, implementing several projects in recent years. According to Nail Maganov, General Director of PJSC Tatneft, a considerable number of company’s professionals have participated in the construction of 700 wells in the West Qurna, North Rumaila and Luheis oil fields.

Anyway, the slow American disengagement from the Middle Eastern theatre has left a vacuum that someone needs to fill. At the same time, increased Russian influence in the MENA region is undeniable, and it was easy to predict that Iraq would be necessary for the Kremlin’s regional penetration strategy. However, Moscow is the biggest producer and the top exporter of natural gas, the second-biggest producer and the third-largest exporter of oil and the fourth-largest electricity producer in the world. Its expertise in fossil fuels exploitation is widely recognised, and the Russian Federation is well aware of it. It is not surprising that the Kremlin takes advantage of it in its relations with other countries, particularly in the MENA region, where Moscow wants to balance the American (declining) influence.

Since the Arab Springs, Russia has become more assertive, being militarily involved in the Syrian conflict and simultaneously laying the foundations for a renewed presence in the Middle East. An area that Moscow foolishly abandoned after the collapse of the Soviet Union, at least until Primakov arrived at the Ministry of Foreign Affairs in 1996.

Apart from other strategic considerations (primarily related to the importance of the MENA region for the projection of Russian naval power in the Mediterranean and the Gulf, for the pursuit of great power status, for the arms export and for its perceived national security interest in fighting radical Islam), it should not come as a surprise that Moscow is increasingly engaging itself in the Middle Eastern energetic sphere. According to a recent OECD report, fossil fuels accounted for 63.2% of Russia’s total exports in 2017, and the revenues derived from oil and natural gas contributed to 36% of the federal budget the previous year. Moreover, estimates of the share of the fossil fuel sector in Russian GDP vary from 10% to 25%. It is therefore evident that Moscow is interested in deepening the dialogue with other crucial oil-exporting countries. To that end, the Kremlin is pursuing a multi-vector strategy that includes diplomatic actions conducted by the government as well as energy agreements signed by the large conglomerates active in the hydrocarbon sector.

On the one hand, although not a member of the Organization of Petroleum Exporting Countries (OPEC), Russia has coordinated its policy with the cartel for several years, trying to maintain oil price stability. Moreover, Moscow is a founding member of the Gas Exporting Countries Forum (GECF), similar to OPEC. On the other hand, the Russian government has contributed to several energy partnerships between the country’s companies and various Middle Eastern nations.

This is part of the “mobilization State” described by Mark Galeotti. According to him, all the means at the disposal of the State help pursue the national interest of the Russian Federation, whether these same means are public or private, civil or military, economic or political and so on. During an address to the government on the 31st of January 2013, Vladimir Putin himself stated that “it is only by mobilizing all the resources at our disposal, both administrative and financial, that we will be able to get results”.

Tatneft fits well in this role, particularly concerning the MENA region. The company is closely linked to the local government of Tatarstan, a Russian territorial entity, considering that Rustam Minnikhanov, Chairman of the Board of Directors of Tatneft, is also President of Tatarstan. By their Muslim faith, Tatars can leverage the common belonging to the Islamic religion in accrediting themselves as reliable partners in the Arab world. The Russian President Vladimir Putin has also often underlined the importance of the Muslim minority within the Russian Federation whenever he finds himself dealing with representatives of a country of the MENA region. It is worth noting that, on the one hand, Minnikhanov is the head of the Group of the Strategic Vision “Russia-Islamic World”, which aims to further integrate Muslim minorities in the Kremlin foreign policy and, on the other hand, that Kazan, the capital of Tatarstan, hosts every year the KazanSummit, an event whose purpose is to further develop economic ties with member states of the Organization of Islamic Cooperation.

However, Tatneft is expanding its presence in the MENA region, and the previously discussed relationship with Iraq is only the tip of the iceberg. In November 2005, the company won an auction for conducting geological explorations in Libya, within the boundaries of Ghadames province. On the 8th of December 2005, Tatneft and the Libyan National Oil Corporation signed a contract on oil production conditions. In 2006, the Russian company obtained other contracts to exploit other three fields in Ghadames and Sirte. At this time, the corporation was the only Russian energetic company allowed to work in the country. Unfortunately, in March 2011, Tatneft was forced to suspend its operations in Libya due to the outbreak of the civil war in the context of Arab Springs. Two years later, the company tried to return to the country, but in 2014 it was again forced to evacuate its personnel due to the dangerous situation in Libya. Tatneft only resumed its work in December 2019, conducting geological explorations in the Hamada region.

Not surprisingly, the company operated also in Syria, one of the major Russian allies in the Middle East. According to a press release published on the official website of Tatneft, the corporation signed an Oil and Gas Exploration and Production Agreement with Damascus in 2003. During subsequent years, other contracts followed, expanding the company’s activities within the country, and in 2010 Tatneft proudly announced that for the first time since its foundation 60 years before, it had started crude oil production abroad, obviously in Syria, in the South Kishma-1 well. As happened in Libya in 2011, the company was forced to evacuate its personnel and to stop oil production due to the outbreak of the violent civil war that still affects the country. However, according to some Russian media, Tatneft is looking into the possibility of returning to Syria. This is not hard to believe, considering the hefty earnings that the company could achieve by taking part in the reconstruction of the Syrian energy sector, almost destroyed by several years of war.

In the end, in 2016, Tatneft has increased its presence in the Middle East by signing a Memorandum of Understanding with Tehran. Based on this non-binding agreement, the company could study opportunities related to the development of the Delhora oil field. At the moment, it is not known at what stage the negotiations with the Iranian authorities are, although signing a preliminary agreement certainly appears to be a good sign. The outbreak of the Covid-19 pandemic slowed down, if not interrupted, the development of several important projects.

Conclusion

In conclusion, Tatneft is a decisive asset of the Russian State. Its roots in Tatarstan, a Muslim region of the Russian Federation, and its considerable economic weight (the fifth Russian oil company) make it a perfect tool for pursuing the Kremlin’s national interest. While the company is expanding its activities in the MENA region, in line with its corporate development strategy, it is simultaneously helping Moscow counter Western influence in the Middle East. Therefore, the energy agreements reached by Tatneft must not be read-only as the logical attempt to make the company prosper, but also in the perspective of the ‘mobilization state’, which involves the exploitation of all the tools available to the State in pursuing the interests of Russia—in this case, penetrating the Middle East.


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