Amid a crescendo of calls in Washington for the imposition of severely tightened sanctions on Moscow, following last week's tragic shoot-down of a Malaysian airliner over Ukraine, I'm wondering whether in, say, six months, the likes of ExxonMobil (NYSE:XOM), BP (NYSE:BP), and Royal Dutch Shell (NYSE:RDS-B), will retain permission to work side-by-side with Rosneft and other Russian state-controlled energy companies.

Somehow I suspect they will. But whether they should is clearly another matter.


You obviously know about the world's latest aviation tragedy, in which nearly 300 passengers and crew perished over eastern Ukraine, almost certainly as a result of a well-aimed Russian-made missile. The aircraft was not the first one shot down, earlier in the week, a pair of Ukraine's military planes were obliterated from the sky. The separatists took credit for those hits.

Tepid sanctions
On Wednesday, the day before Malaysia Airlines' second tragedy in the past four months, President Obama had unleashed a new round of sanctions on Russia. Those strictures resulted from fighting in Ukraine, but as The Wall Street Journal noted the day after they were announced, "The sanctions stop well short of crimping international business ties or blocking deals with entire sectors of the Russian economy."

Perhaps a new round of impediments will contain such blockages. And just maybe, as Senator Ted Cruz from my home state of Texas has suggested, they'll be directed against the country's finance and energy sectors, where they'd clearly have the most impact. Prohibitions against western companies toiling in Russia clearly would affect the three above-named western companies. But they'd have an even more profoundly damaging impact on Rosneft, Gazprom, and their country's efforts to escalate its oil and gas exploration and production skills, both offshore and in its shale formations.

Three majors in the land of unpredictability
As all energy aficionados know, about two years ago Exxon and Rosneft signed a series of joint venture agreements with one another. Those pacts have -- or soon will have -- the largest member of Big Oil helping its Russian counterpart in exploring the frigid Kara Sea in the Russian Arctic, along with similar efforts in the Black Sea.

Further, Rosneft now has stakes in 20 ExxonMobil blocks in the Gulf of Mexico, along with interests in the Permian Basin, which covers parts of Texas and New Mexico. The huge Russian company also has obtained a 25% holding in Exxon's Alaskan Point Thomson natural gas field. And Exxon is sharing its fracking expertise in Western Siberia shale plays. It's not beyond the realm of possibility, nor should it be, that these ventures could be abruptly halted by a fiat emanating from the Obama administration.

Other deals with Russia
For its part, BP owns just shy of 20% of Rosneft, perhaps until the capricious Russians decided it no longer should. It's stake was the spoils for its enduring a highly contentious oil and gas joint venture relationship, TNK-BP, which it owned with a group of Russian oligarchs. When both parties sold what had become the third-largest oil company in Russia to Rosneft for $55 billion, BP received $16.7 billion in cash and a fifth of the buyer's shares.

That relationship could also be thwarted by tightened western sanctions. (Rosneft's CEO Igor Sechin has been named persona non grata by current U.S. sanctions. He's called that labeling illegal because Rosneft isn't involved in the conflagration in Ukraine.)

Shell has a 27.5% interest with Gazprom in Sakhalin-2 on a desolate, eponymously named island in the Sea of Okhotsk, to Russia's east. Until 2006 Shell operated the project, but late that year it was forced to sell much of its then majority interest to Gazprom, for what was generally agreed to be a pittance, relative to the $20 billion the company had already invested in the project. Exxon also continues to operate the Sakhalin-1 project on the same island.

A Foolish takeaway
The Exxon-Rosneft joint venture agreements were billed as opportunities to "share technology and expertise." In reality, that "sharing" is a one-way street, since the Russian's have few capabilities to impart. On that basis alone, were impending U.S.-European sanctions to have the strength to call the western companies home from Russia, the result would be devastating for Vladimir Putin and his country.