Russia Vows to Develop New Markets, Deepen Energy Security

HANOI, Nov 17, 2006 (AP)

Russia flexed its economic muscles on the eve of a meeting of Pacific Rim leaders in Hanoi Friday, pledging to seek out new export markets in the region and use its vast reserves of oil and gas to contribute to the region's energy security.

"Russia has turned its second eagle head to Asia," said Vladimir Frolov, a senior trade official with Russia's Economic Development and Trade Ministry, referring to the two-headed eagle on the Russian seal.

Russian President Vladimir Putin will be fielding a formidable team of Russian executives, many of them with state-controlled companies, to stress just that.

In attendance will be the heads of the world's biggest natural gas producer - OAO Gazprom, Russian arms exporter Rosoboronexport, and metals mogul Oleg Deripaska, owner of OAO Rusal, which is set to become the world's biggest aluminum maker with the consummation of a merger announced earlier in the year.

And Russia will be hoping that a deal with the U.S. on its entry to the World Trade Organization - tentatively slated for signing on at a meeting with George W. Bush on Sunday - will project an image of economic health, eight years after its economy nose-dived. That deal has been seen as the last major hurdle in Russia's 12-year bid for entry to the trade body.

According to Frolov, trade between Russia and APEC economies is set to grow by 30% annually and currently stands at some $52 billion for the January to September period.

That figure is just slightly higher than total trade between Moscow and its former Soviet neighbors in the so-called Commonwealth of Independent States, and a long way off the $160 billion racked up so far between Russia and the EU this year.

But Frolov said that while Russia's dealings with the CIS were steady and unlikely to show an explosion in growth, APEC's markets were wide open for Russia's exporters - in particular its nuclear power station builders, energy companies and its nascent state aviation corporation.

"In APEC we are looking for new markets to sell our products," Frolov said. "(Putin) has attuned us to this and has said that this vector needs to be actively developed."

Asia is also seen as key for galvanizing the economy in Russia's far-flung regions, which lag the breakneck growth seen closer to Europe.

"We need to think how to develop and pull up Siberian and the Far East regions so that they are at the same level as the central regions of Russia," Frolov said. "How can we do this? Via Europe? No, of course not."

Putin stressed the same point in an article published Friday in Vietnamese newspapers.

"As an Eurasian power, Russia's plans for social and economic development (particularly in Siberia and the Far East) are closely linked with active participation in regional integration," Putin wrote.

In the article Putin also emphasized Russia's willingness to play a major role in the region's energy markets and said infrastructure projects were in the works that would contribute to energy security in the region.

"APEC is increasingly interested in having a new, more reliable energy system. Russia is ready to take an active part in implementing this large-scale initiative," he wrote. "We are going to propose and implement a number of specific infrastructural projects."

Specifically, those projects include the construction of twin gas pipelines to China, an Eastern oil pipeline as well as a giant liquefied natural gas project off Russia's Far Eastern island of Sakhalin.

But despite Russia's eagerness to tout the projects, question marks remain.

While initially endorsing a Japanese-backed route for the eastern pipeline to the Pacific coast, the Russian government infuriated Tokyo by then deciding that the destination for its first stage would fall near the Chinese border.

Meanwhile, Royal Dutch Shell PLC's huge Sakhalin-2 liquefied gas project has been threatened with closure by regulators, who have charged the consortium developing it with committing a multitude of environmental violations.

Observers and analysts suggest that the pressure has more to do with a Kremlin desire to assert control over the project than environmental concerns.

Copyright (c) 2006 Dow Jones & Company, Inc.


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