When the disconnected connect, "new" resources are inevitably found

■"Texas Tea From a Russian Sea: Sakhalin's Offshore Reserves Are About to Make Their Debut," by James Brooke, New York Times, 28 September 2005, p. C1.

Russia's massive Sakhalin oil and gas project is finally coming online. It took a large consortium of oil companies to pull it off (Exxon, Shell and BP). The oil and gas were discovered three decades ago, but it took time for Western energy companies to come in with their greater technology and deeper pockets to pull it off (the largest single inflow of foreign direct investment in Russia's history). The resulting integrated oil and gas production facility (armed with Russia's first liquefied natural gas plant) ends up being the biggest in the world.

Here's the key reason why oil companies will not give up on Putin, despite the heavy handed treatment of Yukos, which was essentially sucked back into state ownership:

The recent slowdown in Russian output and the Kremlin's tighter grip on its energy sector have raised concerns over the investment climate in Russia. But with much of the Middle East shut off to foreign oil companies, Russia still offers some of the best prospects for growth in oil supplies.

So while Exxon and Shell work two sections of the field, BP explores a third. Nine other sections "remain virtually untouched."

How much does this matter to Russia? "Sakhalin promises to be a cash cow that will loom large in calculations of Russian economic might."

Until now, Russia has largely produced oil and gas in western Russia for sale only to Europe. Now, just 12 days from the U.S. west coast by tanker, expect the U.S. to encourage a lot of E&P (exploration and production) in Siberia.

Of course, we aren't the only countries interested, as "much of Sakhalin's energy will power China, Japan and South Korea."

The rising demand of Asia has been the real cause of the rising price of oil in the world, and Russia benefits much from this:

"Originally, Russia needed foreign companies for technology and for the money," said William Dinty Miller, senior vice president of BP Sakhalin. Referring to Russia's soaring foreign currency reserves in the era of $70-a-barrel oil, he added: "Now the money argument has gone by the wayside."

Got security? Then rules? Then watch the money flow, the infrastructure get built, the resources flow, and the connectivity expand.

Does that turn Russia into Saudi Arabia? Hardly. Highly literate and educated and technically adept population.

Deal with any Saudi high-tech firms? There are plenty in Russia, including one that goes by the name "Enterra."