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Sat, Feb 11, 2006 - Page 12 News List

Group of Eight to focus on energy markets

TALKS The fallout from Moscow's dispute with Ukraine is likely to force gas and oil talks higher up the agenda of this weekend's meeting of the globe's economic powerhouses


G8 finance chiefs kicked off two days of discussions yesterday focused squarely on mounting Western concern over the Kremlin's swelling clout in world oil and gas markets.

Beginning its first turn at the helm of the Group of Eight, Russia has set a diverse agenda for the meetings that will include talk about world trade, debt relief for poor countries, fighting infectious diseases and terror financing.

As host to its seven G8 partners -- Britain, Canada, France, Germany, Italy, Japan and the US -- Russia has also invited emerging giants Brazil, China, India and South Africa to talks alongside the G8 discussion.

Attention during the two days of meetings that begin with a Kremlin dinner will center on issues likely to be taken up by the G8 leaders at their annual summit in July in St. Petersburg.

Discussion of more technical issues like currency market regulation traditionally addressed by G7 finance ministers -- Russia does not take part in these talks -- will be avoided altogether this weekend, a device to avoid excluding Russia from portions of the meetings it is hosting.

Chief among the issues to be discussed by the ministers is "global energy security," the topic that Russia, a fast-growing world energy giant, has singled out as the top agenda item for its year-long G8 presidency.

Russia made clear last year it would use the G8 discussion process to promote itself as a dependable energy partner with seemingly inexhaustible supply for world markets spooked by high prices and volatility in the Middle East .

What Moscow may not have foreseen was the cascade of consequences from an ugly dispute with Ukraine on pricing for Russian gas supplies that marked the start of its G8 presidency early this year.

That dispute resulted in supply disruption to clients further downstream in Europe. That, coupled with Moscow's reassertion of state control over energy resources, is raising Western concern over its dependence on Moscow for vital fuel and Kremlin linkage of energy to politics.

That concern will be aired at this weekend's G8 finance minister's meeting where, according to the Financial Times, France and others intend to offer Moscow financial incentives to liberalize its gas industry.

However Russia, spanning the globe between Europe and Asia and facing hungry markets in both east and west eager to diversify energy supply away from the Middle East, holds a lot of cards and will not easily be pushed on the issue.

Quoting an unnamed "Western energy diplomat," the Times said any moves aimed at pushing Russian state-controlled energy giant Gazprom to ease its monopoly grip on Russia's gas pipeline network was "wishful thinking."

Russia confirmed as much on the eve of the talks, with Finance Minister Alexei Kudrin saying Moscow was prepared to ratify an energy charter aimed at facilitating its gas flow to Europe but was unable to say when it would actually do so.

"Russia must develop its gas network in order to provide access to everyone, including private companies, and we are working on it," he told a press conference.

"In that context we are going to ratify the charter" he said, but added that "we cannot set a date for the moment."

The charter, drafted in 1991 by the EU's executive commission, aims to improve energy cooperation between the EU and eastern Europe and the former Soviet Union. Russia has signed the text but has yet to ratify it.

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