It is expected that the State Duma will begin consideration of a project for a law on production sharing in the oil industry this week. The draft was presented by Aleksei Mikhailov and Aleksei Melnikov of the Yabloko faction, who worked it out together with a group of specialists that included a former deputy energy minister.


Naturally, Russian oil producers are extremely eager to see the draft adopted as soon as possible. The lack of legislation regulating this most popular form of oil contract has hindered their development and has done much to hold back Western investment in the oil industry. A presidential decree from December 1993 was more of a declaration of Moscow's intentions than an actual resolution of the situation. Most importantly, the decree is too vague on taxation. It is, of course, precisely a special tax regime that distinguishes production-sharing agreements from the ordinary contracts and licensing agreements according to which both Russian and jointly owned oil producers are currently working.


The passage of this law is one of the most important conditions that must be met before the Western companies that are currently negotiating major projects in Priobye, Timano-Pechora and on Sakhalin island can begin work. The majority of Western specialists with whom I have spoken seem to take its approval for granted. They argue that the oil industry brings the treasury about $8 billion each year, implying that it should have comparable political might. They point out that Prime Minister Viktor Chernomyrdin has strong corporate ties with the energy complex and can be expected to defend its interests. In short, the oil industry should be able pretty much to get what it wants.


This point of view, needless to say, is inaccurate, seriously overestimating the industry's political weight, which lags far behind its economic influence. In reality, Russian oil companies work closely with the authorities only on the regional and local levels.


On the federal level, the oil industry's position is considerably weaker. Producers have virtually no access to President Boris Yeltsin's administration. The well-known letter from Yeltsin's security chief Alexander Korzhakov to Chernomyrdin, which has been widely discussed in the press, is really more of an attack on the oil industry than a defense of it. Many highly placed members of the president's inner circle fear contacts with oil producers, who have the reputation of being conservatives opposed to economic reform.


Despite the general opinion that Chernomyrdin defends the oil and gas industry, the truth is that he is too good a politician to remain too closely bound by his old, narrow corporate interests. Instead, Energy Minister Yury Shafranik is responsible for these matters, but his behavior has been more like that of a "junior minister" than an advocate for such major economic giants as Gazprom, LukOil, YuKOS and Sidanko.


The recent agreement under which Azerbaijan granted LukOil a 10 percent share of the Caspian oil deal is characteristic of the situation. As soon as the agreement was signed, the Foreign Ministry announced that it considers the deal invalid since the status of the Caspian shelf has not yet been determined. Shafranik obviously felt uncomfortable in this conflict, and made every effort to avoid openly supporting LukOil.


Early hopes that the representatives of the agricultural and military-industrial complexes in the government and the legislature would agree that only the energy industry is capable of pulling the country out of its economic crisis, and that therefore it must be given a priority role in economic policy proved unfounded. Just the opposite turned out to be the case: The defense industry and agriculture became increasingly active, attaining increased influence for themselves. As a result, the agricultural sector today is considerably more powerful in the administration than the energy industry.


Two groups in parliament are backing the oil industry. The first is the Oil Producers' Union, which is headed by Vladimir Medvedev and is active in the Duma. In principle, oil producers should also be able to count on the support of the large group of deputies called New Regional Policy, also headed by Medvedev. However, this is a highly amorphous body which so far has not worked effectively and which has been criticized by the managers of many of Russia's leading enterprises.


In the Federation Council, the Association of Economic Cooperation of Oil-Producing Regions was recently formed and, it would seem, intends to work together with oil producers. This group includes many of the country's most important regional leaders, leading observers to think that its lobbying potential is considerably greater than that of the Oil Producers' Union.


Shafranik, who besides being Energy Minister is also a member of the Council, was elected the Association's first leader, although he was given only a one-year term. I have been told that it was the presidents of Tatarstan and Bashkiria and the governor of Tyumen who insisted on this limited term. They seem to feel that leadership of the association is too important a post to be long entrusted to a minister who, given Russia's unstable political situation, may well lose his post at any moment. Despite high hopes for this organization, it has not yet had a chance to prove itself.


Melnikov, however, is inclined toward optimism. He is confident that the production-sharing law will pass both chambers of parliament and will be signed by Yeltsin. Leading oil producers, in contrast, are preparing for tough battles in both chambers. They remember that the Duma has already put off consideration of the draft since October, and they see the delay as typical of the problems Russian oil producers face today. Which opinion is right should become clear as the debate in parliament unfolds this week.


Vladimir Razuvayev is a consultant for the NTV television network. He contributed this comment to The Moscow Times.