EU: Russia Using Energy as Diplomacy 'Weapon'

BRUSSELS (Dow Jones Newswires), Nov. 10, 2011

Russia is using its natural gas as a "weapon" in international relations, the European Union's energy chief said Thursday, underscoring again how energy relations between the two countries are becoming increasingly tense.

"Putin is not interested in having a new Red Army, he sees energy as being his weapon," Guenther Oettinger said during an event about Europe's energy security at the European Parliament. The EU has to recognize that quickly and react jointly, he said.

Outside experts have long said that Russia's new foreign policy tool is its gas, but top EU officials have rarely used such stark language in public. Pressed by journalists, Oettinger, who has a reputation as one of Brussels' more outspoken officials, specified that his words were just aimed at providing a picture of the situation.

There has long been friction on energy between Russia and Brussels, where some officials remain leery after conflicts between Russia and the Ukraine disrupted some shipments to Eastern Europe in recent years. The European Commission, which has executive and antitrust powers in the EU, has been pushing member countries to implement new rules to liberalize its natural gas market and break the grip that energy majors have on it.

This also means eroding OAO Gazprom's (GAZP.RS) position in Europe and forcing the company to loosen its control over pipelines that import Russian gas to Europe, something that Moscow has seen as a threat to its investments.

The situation has been exacerbated by an antitrust investigation launched by the European Commission against energy companies in eastern Europe based on the suspicion that they were partitioning markets, preventing competitors from using networks and imposing excessive prices. Gazprom's deputy chief executive publickly slammed the EU investigation earlier this week.

At the same time, the EU is likely to be more and more dependant on Russian gas in the foreseeable future as some European countries retreat from nuclear power.

Oettinger himself acknowledged Tuesday --as he was inaugurating the opening up of a new gas pipeline from Russia to Germany-- that Russia is expected to further increase its gas shipments to Europe in the longer-term to around 200 billion cubic meters a year from around 125 bcm now, or some 25% of the EU's gas consumption.

Copyright (c) 2011 Dow Jones & Company, Inc.

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