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Energy security headache clouds G8 summit
By Nick Coleman
AFP
MOSCOW
Petroleumworld.com 07 11 06Russia has put energy security at the top of this week's Group of Eight summit agenda, but sharp differences between Moscow and other G8 members over what that concept means have cast a cloud ahead of the meeting, analysts say.
Russia's first G8 chairmanship and President Vladimir Putin's hosting of the Saint Petersburg summit this coming weekend coincide with growing worries about energy.
The concerns are linked partly to rising oil prices but also to fears in the West, especially in Europe, about Russian policy and over-reliance on Russian resources.
Russia is the world's second largest oil producer after Saudi Arabia. It is the largest natural gas producer and has the largest proved reserves of natural gas, with 26.6 percent of the world's total, according to the energy giant BP.
But despite such riches, Russia has yet to convince Western consumers that it is a reliable supplier.
"There is something of a deadlock at the moment," said Julian Lee, an analyst at the London-based Centre for Global Energy Studies, noting that Moscow had abandoned plans to ratify an energy charter it signed in 1994 intended to regulate energy ties between Russia and the West.
Tensions were brought into focus last winter by Russia's brief cut-off of natural gas supplies to Ukraine and the knock-on disruption of supplies to Europe, as well as by an extreme cold snap that prompted more cut-offs.
For the United States the problems over energy are now largely "philosophical", said Lee, as they mainly reflect general US concern that Russia should be a stable investment environment and should help to stabilise energy markets.
That view is shared by Valery Nesterov, an analyst with Moscow-based investment house Troika Dialog.
He says Washington has had to abandon hopes of Russia becoming a major oil supplier to the United States following a decision by Moscow to down-grade plans for a pipeline from Siberia to Murmansk, just nine days by tanker from the United States.
But US officials are keeping up the pressure. Ambassador William Burns wrote recently that the "issue" with Russia was how it would "choose to take advantage of the opportunities before it and overcome... significant challenges".
Fellow G8 member Japan also wants to ensure that new Siberian energy fields benefit the whole Pacific region and not just an increasingly demanding China.
The biggest tension centres on Europe, where an enlarging European Union is hungry for gas, prizing its low environmental impact.
Russian officials say that "energy security" means they should have long-term contracts with Europe that would give them confidence to develop gas fields in such challenging areas as the Arctic Circle.
But the EU, which sits in on G8 meetings, argues that energy security means loosening the monopoly on exports of natural gas behemoth Gazprom.
This, the EU argues, would stimulate building of alternative pipelines and much-needed investment in new fields.
Gazprom is now resorting to gas from ex-Soviet Central Asia to help it keep pace with demand. But there are signs of strain as Turkmenistan, which supplies Russia and Ukraine and also has a pipeline to Iran, tries to raise prices, making it, in Nesterov's words, a "capricious partner".
Among some analysts there is sympathy for Putin's argument that if Europe wants to buy into Russia's gas system -- the "holy of holies" as he has put it -- then Russia should be able to buy into Europe's gas network.
"Continental Europe has not moved far enough in deregulating their markets in gas and electricity," said Lee.
Gazprom is slowly making inroads: deals are planned with Italy's ENI and on building a pipeline from the Netherlands to Britain.
But even in deregulated Britain there is some wariness of Gazprom as rumours circulate of a possible bid for the Centrica distributor.
Some European politicians, particularly in the new EU countries, have expressed alarm over the political implications of Gazprom's widening reach, prompting complaints in Moscow of anti-Russian bias.
Amid these troubles, the G8 leaders are unlikely to go beyond "broad declarations", while Russia and Ukraine may be headed for another gas crisis, says Nesterov.
"The G8 summit won't preclude a possible energy crisis with Ukraine this winter," Nesterov said.
AFP 11 0251 GMT 07 06
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