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MARCH 21, 2002

Why the desire for a Russian Grand Prix is growing

THERE has been a lot of talk (and not much action) regarding a Grand Prix in Russia. The current project being talked about on Moscow's Nagatino Island has gone very quiet in recent months. It is said that money is the problem but getting a straight answer in this respect is not easy.

Formula 1 will go to Russia if the money is right and if the powers-that-be are sure that it will do the sport no harm from an image point of view.

Certain elements within Russia see a Grand Prix as a way to show the world that the country is a safe place to do business and a friend of the West rather than a rival. President Vladimir Putin has been involved in a charm offensive in the course of recent months, something which has rather confused Russia-watchers in the West.

The answer seems to lie in oil. Russia is a huge producer of oil and wants to exploit that resource to the maximum. Russian oil production in the last two years has increased dramatically and that is now beginning to threaten Saudi domination of the oil markets. In January OPEC (led by Saudi Arabia) cut oil production to stave off a collapse in the price of oil. But Russia is not an OPEC nation and production continues to grow.

The Saudis have dominated the oil business since the 1970s, seeing off any challenges on occasion by raising production, causing the price of oil to collapse. This has encouraged (bullied is perhaps a better word) others to fall into line with OPEC policies. But Russia is different. It is not reliant on oil and, because it trades in roubles rather than dollars, is less susceptible to fluctuations in the value of the dollar caused by falling oil prices. The Russian oil industry is also much more international with the big Russian players such as Lukoil, Yukos and Surgutneftegas operating alongside global giants Shell, Exxon and BP. The growth of the industry has led to new pipelines and oil ports and Russian oil companies, notably Lukoil are beginning to look to the West for new markets and expansion. As an indication of this Lukoil recently bought the Getty company in the United States and has plans to become one of the major global oil companies in the years ahead.

The Russian government sees that oil can lead the economy to better things and in recent months the pressure within Russia has been growing to get rid of organized crime and improve the image of the country as a safe place for foreign firms to do business. Since September 11 this policy has been given new impetus as fears amongst western powers that they are too reliant on Arab oil has led them to start listening to Russian voices, notably the suddenly ultra-charming Putin, who sees a big future for his country in partnership with the West, rather than as its rival.

A Grand Prix in Russia - run by the right people - fits neatly into this program.