Russia Under Pressure To Guarantee Gas Supplies After Shortage In Ukraine

MOSCOW, Russia -- The Group of Seven leading industrial countries put pressure on Russia at the weekend to ratify an energy supply charter in the wake of the supply scare last month when it briefly turned off the gas taps to Ukraine and western Europe.

Russian finance minister Alexei Kudrin

After a sometimes fractious meeting, Russian finance minister Alexei Kudrin said his country, the world's biggest gas producer, was keen to be a stable supplier and help develop a world market for gas but refused to comment on the framework charter, which Russia has already signed but not yet ratified.

Several countries, especially France, think that getting Russia to ratify the charter would help ensure security of energy supplies, greater transparency of markets and clearer rules over transit pipelines. The charter, drawn up by European countries and Russia in the early 1990s, has been signed by over 50 countries, although not the United States or Canada.

Russia is now the world's second-biggest oil exporter and holds the world's biggest gas reserves. It supplies a quarter of the European Union's gas and its actions in early January, just as it assumed the presidency of the Group of Eight (G7 plus Russia), sent shockwaves throughout the EU and the US, both of which are heavily dependent on imported energy.

Russian gas giant Gazprom also caused jitters in Britain recently when it suggested it could buy British power companies such as Centrica or Scottish Power.

The ministers released a communique after their meeting saying that energy security had now moved to the top of the agenda for their next meeting and pledged to work on improving the dialogue between oil producers and consumers and private sector companies.

Mr Kudrin said Saturday's talks had been tense. "Each minister represents his own country's interests. But our aim is to be one of the most stable suppliers," he said. If Russia were to ratify the charter, Gazprom may have to allow smaller local producers access to its huge pipeline network and the country would have to open up its energy business to foreign oil and gas companies.

French finance minister Thierry Breton said all countries needed greater visibility in energy markets, better rules over pipeline transit and reliability of supply. All of these were covered by the energy charter, he said. "The recent Ukraine affair showed that the dialogue between Europe and Russia could function better. Russia has signed the charter, now it must ratify it."

Russian president Vladimir Putin struck a conciliatory tone, telling ministers: "We need to develop a civilised strategy which will reliably secure the world with energy at reasonable prices and with minimal damage to the environment."

The chancellor, Gordon Brown, who has long called for greater dialogue between the Opec oil cartel and oil consuming countries, said gas should now be brought into the same discussion. "I believe we should now enhance the dialogue with Opec and other energy producers, extend transparency, agree to bring gas as well as oil into the initiative to improve data and move forward with incentives for investment in new sources of energy and energy efficiency," he said.

The ministers also discussed a Russian offer to repay a further $11bn-$12bn (£6.3bn-£6.9bn) of its debt to so-called Paris Club creditor nations this year, on top of the $15bn repaid last year after surging oil and gas prices brought it a revenue windfall. Russia urged the rest of the G8, the key Paris Club creditors, to use the money to bolster the balance sheets of the World Bank and African Development Bank, allowing them to make good on a pledge made at last year's Gleneagles summit to write off $37bn of debts owed by the world's poorest countries. Not all countries were keen on Russia establishing that link, however.

Firms suffer

Britain's smaller manufacturers are seeing their costs increase because of higher fuel prices but are unable to pass them on to customers because of weak consumer demand, according to a CBI survey. Thirty-nine per cent of those questioned said costs rose in the final three quarters of 2005 compared to the previous three months. Small and medium-sized businesses appear to be harder hit by rising energy prices than their larger rivals. "The relative weakness of the domestic economy is undermining demand so business cannot pass on the increased costs, in the form of higher prices, to their customers," said the CBI's Steve Sharratt.

Source: Guardian Unlimited