G8 tells Russia: Break gas monopoly
 
Feb 13, 2006 - Independent-London
Author(s): Philip Thornton Economics Correspondent In Moscow

Finance ministers from the world's richest countries issued a public rebuke to Russia after a "stormy" weekend meeting in Moscow. They warned Russia to implement new rules crucial to tackle soaring energy prices.

 

Members of the Group of Seven (G7) nations, who were hit by shortages last month when Russia blocked supplies through its export pipeline because of a dispute with Ukraine, urged Russia to ratify a legal charter that would break the export monopoly held by the state- owned giant Gazprom.

 

The Group of Eight - the G7 plus Russia - meeting in Moscow for the first time, said the world economic outlook was "solid" but added that "high and volatile" energy prices presented the most potent risk to growth. In the official communiqu released on Saturday after two days of talks, they said: "Market mechanisms are vital to the effective functioning of the global energy system."

 

Thierry Breton, the French Finance Minister, said Russia must ratify the Energy Charter Treaty, an agreement guaranteeing supply which it signed in 1994. "Russia has signed the charter and must now ratify it," he said. "The position of us all is that there has to be a better visibility, reliability of supply and rules over transit - and prices."

 

Alexei Kudrin, the Russian Finance Minister, admitted the meeting had been stormy. "Clearly all discussions between ministers are quite tense because this is a struggle and fight of different opinions. Every minister protects the interests of the community he or she represents." He added: "We talked about the energy charter but I'm not getting into that at the moment. We will continue to discuss the energy charter."

 

In a separate move, Gordon Brown, the Chancellor of the Exchequer, said he had persuaded Russia's President, Vladimir Putin, to support a British initiative to liberalise world energy. "As confirmed in my conversations with President Putin, it is clear there will be a major energy initiative for both developed and developing countries over the course of the year," Mr Brown said.

 

He said there had to be greater dialogue with oil-producing countries and that he wanted to extend a project on increasing transparency on oil reserves into the gas sector.

 

Joaquin Almunia, the EU's economic and monetary affairs commissioner, said a free energy market would improve security of supply. "We have to develop a market mechanism and to try to diversify our energy sources," he said. "It is a way to increase our energy security."

 

However analysts are sceptical that the G8 can achieve progress. "The G8 will not be able to increase oil and gas supplies through administrative fiat," Stephen Lewis, the chief economist at Monument Securities, said. "They can do no more than explore the possibilities for co-operation to enhance the security of energy sources and, perhaps, to prioritise energy uses."

 

Others point out that Russia, which is usually sidelined by the G7, is determined not to give up power on gas given that it is its geopolitical trump card.

 

Gazprom said this month that it wanted to break into the UK gas supply market, but the Government has warned that Gazprom's desire to bid for Centrica, the owner of British Gas, would be likely to trigger a competition investigation.

 

 


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