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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