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Russia and Norway Sign Border Deal for Arctic Energy

Source: Reuters 9/15/2010, Location: Asia

Russia and Norway ended a 40-year dispute by signing an Arctic border treaty on Wednesday, which opens the door to offshore oil and gas exploration.

President Dmitry Medvedev and Norway's Prime Minister Jens Stoltenberg presided over the signing in Murmansk, a Barents Sea port city near the Norwegian border north of the Arctic Circle.

The disputed territory covered 175,000 square km (67,600 sq miles), an area about half the size of Germany, mainly in the Barents Sea between proven petroleum reserves on the Russian and Norwegian sides.

"It took us 40 years to get to this treaty," said Medvedev, who struck a preliminary deal with Stoltenberg in April. The Russian president said the deal would open up new opportunities for oil and gas exploration and fishing.

Any oil and gas fields straddling the border would have to be developed jointly, according to a Kremlin statement.

Canada, Russia, Norway, the United States and Denmark -- the only nations with Arctic coastlines -- are racing to file territorial claims over oil, gas and precious metal reserves that could become more accessible as the Arctic ice cap shrinks.

International law states the five have a 320 km (200 mile) economic zone north of their borders, but Russia is claiming a larger slice based on its contention the seabed under the Arctic is a continuation of its continental shelf.

Chris Weafer, chief economist at Moscow investment bank Uralsib, said ending the dispute was part of a broader Russian push to win diplomatic points and attract investment by projecting itself as a fair player on the international stage.

Moscow is "keen to project this new softer and pragmatic approach as it looks to improve Russia's image and investment credentials internationally," Weafer said in a note to investors.

He also said the move made it more likely that Norway would back Russia's Arctic claim.

COMMUNIST-ERA SCANS

Much of the disputed zone is located between Gazprom's huge Shtokman field on the Russian side, a reservoir holding enough gas to meet the world's entire consumption for a year, and two oil and gas fields off the Norwegian coast in which Norway's Statoil has stakes.

Communist-era scans of the long-disputed zone reportedly indicate that oil and gas deposits are generally bigger and more numerous in the eastern Barents Sea, which belongs to Russia.

Some reports talk of up to 10 billion barrels of oil equivalent in the disputed zone, but oil industry officials say that modern seismic studies were needed to verify old estimates.

Norway's oil production is declining as its core North Sea oil fields are gradually depleted. No major fields have been found off Norway since the late 1990s.

The Norwegian Oil Industry Association said the new zone could be open to seismic surveys as early as 2012-2013 if it is included in a government white paper due out later this year.

The two countries also said the deal would boost cooperation on fisheries in the sea.

In a reminder that Cold War tensions still linger along the lines between Russia and its European neighbours, Medvedev quipped that "the Arctic can do fine without NATO" and said Moscow is concerned about the alliance's activity in the area.

Russia "views such activity with quite serious tension, because it is after all a zone of peaceful cooperation, economic cooperation, and of course the military factor always -- at a minimum -- creates additional questions," Medvedev said. (Reporting by Denis Dyomkin, writing by Guy Faulconbridge and Steve Gutterman, editing by Gleb Bryanski and Matthew Jones)

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