Journey to Sakhalin
Assessment Reference IBS/July 2009/2_Donovan A. Moore_7558334
REPORT ON ROYAL DUTCH/SHELL INVESTMENT PROJECT IN RUSSIA
‘JOURNEY TO SAKHALIN’
INTRODUCTION
The purpose of this report is to comprehensively analyze and assess the investment venture of Royal Dutch/Shell in the Russian Oil Industry, with specific focus on the Sakhalin II Investment project, operated through the subsidiary of Sakhalin Energy Investment Company (SEIC). This analysis will commence with a revision of the political risk assessment pertaining to Russia, and will continue from that platform by an identification of likely factors and situations of potential conflict. Such information will then provide the basis for developing the risk avoidance steps that the company can take in order to protect itself from excessive exposure. In the first instance the report will seek to structure the necessary risk mitigation during the transitional aspect of taking further steps to the second phase of Sakhalin II. In the final instance the report will continue by formulating the measures required to reduce the impact of political risk, after the investment is fully undertaken. Conclusive premise(s) can then be provided to complete the report.
POLITICAL RISK ASSESSMENT OF RUSSIA
Considering the reality of Russia’s political past, and its struggles encountered during the transitional period of the early 90’s towards democracy and free market system, it would be reasonable to project that a significant level of obstacles for business enterprises, particular foreign businesses exist. Analyzed from a political perspective, five factors may be suggested that when assessed can help to define the level (and perhaps more appropriately), the nature of the political challenges and risks that a foreign firm would face. These five factors are:
A. Historical Foundation – The political, as well as the related aspects of social, economic and even cultural experiences that Russia would have had for the years. (The
REPORT ON ROYAL DUTCH/SHELL INVESTMENT PROJECT IN RUSSIA
‘JOURNEY TO SAKHALIN’
INTRODUCTION
The purpose of this report is to comprehensively analyze and assess the investment venture of Royal Dutch/Shell in the Russian Oil Industry, with specific focus on the Sakhalin II Investment project, operated through the subsidiary of Sakhalin Energy Investment Company (SEIC). This analysis will commence with a revision of the political risk assessment pertaining to Russia, and will continue from that platform by an identification of likely factors and situations of potential conflict. Such information will then provide the basis for developing the risk avoidance steps that the company can take in order to protect itself from excessive exposure. In the first instance the report will seek to structure the necessary risk mitigation during the transitional aspect of taking further steps to the second phase of Sakhalin II. In the final instance the report will continue by formulating the measures required to reduce the impact of political risk, after the investment is fully undertaken. Conclusive premise(s) can then be provided to complete the report.
POLITICAL RISK ASSESSMENT OF RUSSIA
Considering the reality of Russia’s political past, and its struggles encountered during the transitional period of the early 90’s towards democracy and free market system, it would be reasonable to project that a significant level of obstacles for business enterprises, particular foreign businesses exist. Analyzed from a political perspective, five factors may be suggested that when assessed can help to define the level (and perhaps more appropriately), the nature of the political challenges and risks that a foreign firm would face. These five factors are:
A. Historical Foundation – The political, as well as the related aspects of social, economic and even cultural experiences that Russia would have had for the years. (The