The Bush administration recently complained to Moscow about the crackdown on Russian oil giant Yukos, and its impact in driving up the price of oil and raising doubts about the reliability of supplies. Russia is the second-largest oil exporter after Saudi Arabia, and a major alternative energy source to the increasingly volatile Middle East.
Rising oil prices threaten to rekindle inflation, slowing the world economy and the US economic recovery, as President George W. Bush heads towards a tight election battle with Democratic nominee Senator John Kerry. Senator Kerry is making energy security for the United States a major campaign issue.
But it is not only the US that is worried. The Kremlin-Yukos brawl has also caused alarm in China, which has been looking to Russia for increasingly large amounts of oil and gas to reduce reliance on the Middle East and Africa. In the first half of this year, Russia became China's fifth-largest crude oil supplier, accounting for 8.5 per cent of total imports. Most of this oil is supplied by Yukos, whose output last year accounted for nearly 20 per cent of Russian production.
The Wall Street Journal reported on August 11 that Beijing had sent letters to Russian President Vladimir Putin and Prime Minister Mikhail Fradkov, seeking assurances that deliveries to China will not be disrupted.
The tug-of-war over Yukos began with the arrest in October of the company's founder, Mikhail Khodorkovsky, on charges of fraud and tax evasion after he funded opposition parties and threatened to challenge Mr Putin in presidential elections earlier this year. The Russian government has given Yukos until the end of this month to pay a US$3.4 billion tax bill. Otherwise, its biggest oil-production units will be sold, probably to interests friendly to the Kremlin.
Yukos said in March that it would more than double deliveries of oil by rail to China, to at least 300,000 barrels a day by 2006. This was seen as a consolation prize for Beijing after the Kremlin decided against a Yukos-backed proposal to pipe oil from fields in eastern and western Siberia direct to Daqing in northeast China. This pipeline could have carried as much as 30 million tonnes of oil a year to China - or up to 25 per cent of its current oil imports, which amount to one-third of total consumption.