By Kenneth Rapoza , Forbes
On this one particularly issue, no neighbor beats the Russians.
True, Russia is not a major trading partner with the United States overall. It is nowhere near on par with our NAFTA partners in Mexico and Canada. But when it comes to one very important and politically powerful sector of the economy, Russia beats them both. They have come to be a reliable partner, despite three years of sanctions, back-to-back recessions, and a decline in oil prices that have hurt revenues.
Outside of Boeing airplanes, Russia’s single biggest import from the United States is oil and gas drilling equipment as defined by the Foreign Trade division of the U.S. Census Bureau. This business relationship with the Russians will likely force the Senate’s hand on their new Russian sanctions bill, which called for extra-territorial sanctions on companies doing business with Russian energy firms anywhere in the world.
According to a WSJ article this week, the likes of Exxon and Chevron have lobbied hard against the new bill. That’s probably why Paul Ryan, House speaker, sent it back to the Senate.
Last year, Russia spent $391.7 million on U.S. oil and gas drilling equipment, according to U.S. Census data. Some of that equipment is sanctioned, mainly for deep sea Arctic projects and shale gas exploration. Any technology or equipment used for fracking is also banned.
Exxon is sitting on a $720 million joint venture to explore for hydrocarbons in the Kara Sea in the Russian Arctic. Sanctions have had that project on hold for three years.
Russia’s imports of oil and gas equipment has held fairly steadily over the last 10 years despite economic hardship. It’s up from the $264 million in 2015, but down from the $458 million peak in 2008 when oil was over $150 a barrel. Russia is closer to its peak than many major trading partners in this space.
Mexico is in even worse shape. They’re import values have gone the other way. Last year, Mexican energy firms bought $287.2 million on American made oil and gas drilling equipment, down from $920.9 million in 2015, $1.2 billion in 2014, $1.4 billion in 2013, and less than the $487 million purchased in peak oil pricing back in ’08.
Canada is sliding and not as big a market as Russia. Their companies imported slightly less than the Russians last year at $388.5 million, according to Census data. Canadians spent $683.5 million on equipment in 2015, down from more than a million dollars each year for the four years prior. Some of this may have to do with business cycles and new fields coming on line.
Other energy countries also bought less last year.
The Saudi’s imported less equipment than the Russians. They bought $176.8 million worth of drilling equipment from the U.S., down from $377.3 million in 2015 and way off their 2008 peak of $540 million.
The U.K. imported $160.5 million worth of oil and gas drilling equipment last year, a decent reversal from the $281 million a year before and below the 2008 peak of $619.7 million. The U.K. is one of the biggest gas producers in the European Union.
The United Arab Emirates, the largest exporter of liquefied natural gas, imported $219.2 million last year. That’s three times less than their 2008 peak of $795 million.
What about the Brazilians and all that deep sea oil and gas they have far below the salty bedrock off the coasts of Rio and Sao Paulo? Due to low oil prices and a corruption scandal that’s knotted the purse strings of state-owned energy giant Petrobras, Brazil imported $183.3 million worth of equipment in 2016, down from $292.6 million in 2015 and down from Brazil’s 10-year high of $957 million in 2007 when new oil fields were coming on line.
These numbers suggest that American oil and gas companies have come to rely on Russia as a steady hand. Business would be much better if sanctions were removed. But business will surely be a whole lot worse if sanctions are imposed on Russian energy firms worldwide, as the June Senate bill — passed by an overwhelming majority — currently states as their goal. That would ban U.S. companies from selling certain equipment to them until Congress ok’d sanctions removal. Given the anti-Russia rhetoric in Washington, that is unlikely to occur without massive pressure from the oil lobby.
By going harder on Russia, the Senate has put some powerful corporate entities in the corner with Trump. Some are growing impatient with the outcome, as the WSJ reporting shows. That is because American oil companies, in theory, may be able to compete with Russia in Europe if Russians are sanctioned there. But on the other hand, those same companies will absolutely have a harder time doing business in Russia; a country that has been nicer to them over the last year than Mexico and Canada.
