If it were not for the Bush administration's obsession with regime change in Iraq, last week's energy summit in Houston would have been a genuine historic event celebrating cooperation between the United States and post-Soviet Russia. In principle, energy cooperation between the two countries is logical and even noble. In reality, politics is attempting to lead the nose of reason and practicality.

For the most part, the American and Russian sides talked to each other at cross-purposes. The Russians, beyond achieving the respect they have craved since the 1990s chaos in the oil sector, talked about energy cooperation across a wide spectrum of topics – oil, gas, nuclear, and renewables. The Russian delegation even discussed the possibility of creating a global strategic oil reserve. The American side simply talked about U.S. interests in terms of the country's foreign policy imperatives: Iraq phobia, an uncertain Saudi Arabia, and supply diversification.

There are a number of issues hindering large-scale export of Russian oil to the United States. Delivery to the U.S. market remains either unavailable in a real sense or extremely expensive. Large oil tankers cannot navigate through the Bosporus and the Dardanelles. Add to this the fact that Russia has no deep-water ports enabling crude transport.

Assuming that current plans for completing pipeline expansions stay on schedule (upgrading and expanding Transneft and Baku-Tbilisi-Ceyhan, laying the pipeline to China, building Yaroslavl-Murmansk terminal, and laying a turnaround connection to the Caspian Pipeline Consortium), Russia can feasibly increase oil exports to around 6 million barrels per day, about double the current level, by 2010. This would be an outstanding accomplishment for Russia, but when put into an international context it appears less than striking.

If everything works out as planned, Russia will have a controlling influence on 16 percent of the world oil market share, up from the present 12 percent. Over the same time, it is expected that oil coming from the Middle East will increase its market share from the present 52 percent to 54 percent. In terms of proven reserves, Russia remains a dwarf with only 6 percent of the world total compared to the Middle East's 65 percent. U.S.-Russia cooperation in the energy field, no matter how extensive, will not wean the world away from Arab oil anytime soon.

Beyond these physical barriers, the state of Russia's reform project is also at issue. Confusion and constant change in tax legislation are major irritants for Western foreign investment in the oil sector. Economic Development and Trade Minister German Gref told conference participants that the energy law with production-sharing guidelines could pass late this year or early next year, depending on how the second, third and fourth readings of the 2003 budget play out. Why passing this law is dependent on next year's budget was not made clear. Regardless of how much the government frets over these issues, Russian oil majors cannot be bothered with the tax regime as long as oil prices remain high.

Clearly the summit was one sided in terms of state-to-state relations. It was reported that Energy Minister Igor Yusufov was simply beside himself when visiting the U.S. Strategic Oil Reserve, which was designed to protect the American consumer in the event of a major international oil crisis, and that Russia may be able to contribute to that reserve. What did not get much attention was the creation of a Russian strategic oil reserve. The minister, a strong supporter of the idea, mentioned that he hoped a similar reserve would be founded in Russia in two or three years. In theory, who could disagree with the idea? But in practice, Russia's oil companies are not convinced, believing that there is a hidden Kremlin agenda behind it.

If there were any winners at Houston, it was Russia's oil majors. All that the Russian state might ultimately get is some American goodwill. Russian companies are the primary beneficiaries of OPEC's decline in world market share. Yukos and Surgutneftegaz have already increased their production forecasts and, as a result, increased their top-line revenues. Assuming the average price of a barrel of oil is steady at around $20 through to 2006, Yukos' net income will increase to $4.3 billion, compared to a $2.6 billion net income at current production rates. Russian oil companies are not much different than their international peers in one respect: profits first, with national interest only vaguely defined.

Was the summit about Iraq? Unfortunately, it was. The Americans surely heard what they wanted to hear. On the other hand, Russian companies were positioned for a win-win scenario. Russia's oil barons have finally been permitted to sit at the adult's table of international oil. Though cigars were certainly smoked by all, the delegation was only served a Happy Meal. The United States is attempting to re-arrange the international order, and Russian oil companies are simply grateful that regardless of what comes out of it, the world will still need petroleum. The Houston conference will be remembered as the time when Russian oil companies joined the club; Iraq will only be one part of the Bush family legacy.

(Peter Lavelle is a Moscow-based analyst. Email him at plavelle@rol.ru.)