WATCHING GOVERNMENT HELPING RUSSIA, HURTING THE U.S.?

U.S. independents are annoyed that the Clinton administration's impending gas and oil initiative will not offer tax incentives or oil import relief to encourage production.

And they are even more annoyed at how the U.S. is trying to boost oil output in the Former Soviet Union (FSU).

A foreign aid bill this fall contained more than $2 billion for FSU countries, including $185 million earmarked for enhancing trade specifically mentioning energy trade), and $285 million for energy and environmental projects (including nuclear and energy efficiency).

Separately, the U.S. funded Overseas Private Investment Corp. is providing $2.5 billion in risk insurance and loan guarantees to support U.S. companies' ventures in the FSU.

And this fall Energy Sec. Hazel O'Leary signed a pact with the Russian Federation to help it privatize its fossil energy facilities, boost oil production, and improve refining.

U.S. officials explain that helping the FSU republics produce oil will help stabilize their economies and will have the effect of increasing oil supplies on the world market.

A recent congressional Office of Technology Assessment report agreed.

It said if former Soviet bloc oil exports increased 1 million b/d, world supplies would effectively grow about 4% and lower prices about 3%. "Since the U.S. imports about 7 million b/d, which now costs $20/bbl, savings would be $1.5 billion/year."

INDEPENDENTS DUBIOUS

Virginia Lazenby, National Stripper Well Association president and vice chairman of the Independent Petroleum Association of America's crude oil policy committee, is dubious.

She recently wrote Sec. O'Leary, "What kind of signal does this send to U.S. producers? This administration cannot find a way to help the U.S. producer, but instead finances foreign production in Russia.

"Is this program aimed at your belief that the U.S. should seek out 'diversified' sources of energy, so as not to be overly reliant on the volatile Middle East? It would appear that today's Russia is at least as volatile as the Middle East, if not more so.

"Not only has the administration failed to come up with a viable plan for the domestic energy industry, it is financing the development of foreign production that will come on the market, drive the price down further, and put more of us out of business. This hardly seems fair."

HERITAGE FOUNDATION VIEW

Meanwhile, the conservative Heritage Foundation thinks aid should be withheld until Russia removes bureaucratic obstacles to entrepreneurship in the energy sector.

"Putting good money into a bad system will not solve the problems. In fact, by relieving much of the pressure for fundamental reform, western foreign aid actually will make the situation worse."

It said privatization of Russia's energy sector would entice foreign investments far exceeding any Western aid.