On the heels of this announcement regarding Russian oil giant Yukos’ default on $1 billion in bank debt, this Wall Street Journal ($) article provides an excellent overview of Exxon‘s travails in attempting to make a major investment in Yukos. The entire article is well worth reading, and here are several excerpts:

Exxon and many other Western oil companies had big ambitions when they flocked to Russia looking for deals after the collapse of communism in 1991. Once the world’s largest oil producer, the former Soviet Union represented the biggest new opportunity for the world’s oil companies in a generation.
But the story of Exxon’s delicate dance with Russia shows that the opportunity has been much more elusive than the oil giants and the Western political leaders hoping for an alternative to Middle Eastern oil envisioned. Russian President Vladimir Putin, whose methodical strengthening of Kremlin authority has fueled fears he is undermining democracy, has increasingly sought to keep the state’s hand in the oil industry, which was almost completely privatized in the 1990s.
U.S. officials privately acknowledge that highly publicized efforts to diversify energy sources by cooperating with Russia have largely turned out to be a dry hole. Exxon officials declined to comment on anything related to a possible Yukos pact. The Kremlin press office declined to respond to a detailed request for comment.

As Exxon pursued the investment with Yukos president, Mikhail Khodorkovsky, the following exchange and incident occurred after one negotiating session:

After the session, where the exchange about Russia’s oil reserves took place, Mr. Khodorkovsky was asked if the Kremlin would allow him to sell a majority stake. “Political realities here change every day,” he said.
Moments later, as most panelists and audience members crossed the hall for a speech by President Putin, Mr. Khodorkovsky got an urgent cellphone call from his wife. She told him their house was surrounded by police.

As Exxon pressed on for an investment in Yukos, Russian government control tightened:

In an interview published that day on the Kremlin’s Web site, Mr. Putin was asked his view of Exxon buying 40% of Yukos. Mr. Putin said he would support Exxon’s activities, but that “it would be right” for Exxon to consult in advance with the Russian government on such a large deal. Russian oil-industry executives detected a cautionary tone, but Exxon officials remained confident their deal was on track, according to people familiar with the situation.
Mr. Khodorkovsky held a defiant news conference at Yukos’s new Moscow headquarters the Monday after the police searches. “If the goal is to drive me from the country or put me in jail,” he told a room packed with TV cameras and reporters, “they’d better put me in jail.”
On Oct. 25, they did. Heavily armed agents stormed onto his rented jet at a refueling stop in Siberia. He was flown back to Moscow.

The message from Exxon’s experience is clear — Russia will gladly accept foreign investment so long as Russian control of the assets and business is not disturbed. Frankly, Russia needs a few (maybe more) of dwindling foreign investment before its unrealistic position will change.