G8 Meeting Fails to Resolve E.U.-Russian Uncertainties

Group of Eight finance ministers convening in St. Petersburg, Russia, on Saturday failed to resolve energy trade issues between the European Union and Russia, leaving the possible ratification of the International Energy Charter to political leaders at next month's G8 summit.

While participants agreed that high oil prices were threatening the global economy, calling on energy producers and consumers to "facilitate investment in the energy sector, improve energy efficiency, including through national initiatives, and promote greater transparency and reliability in energy market data," they did not agree on whether state-run Gazprom should end its monopoly over Russia's gas exports or whether the European Union should open its gas retail sector and other energy markets to Russia.

As Russia tries to consolidate its control over its own gas sector, it is looking to expand its reach into European markets. Finance Minister Alexei Kudrin said Gazprom is still interested in acquiring Britain's Centrica and that he saw "no obstacles" to increasing Russian access to Italian consumers (Saeed Shah, London Independent).

A new proposed Russian law would ban foreign ownership of big oil fields (Andrew E. Kramer, New York Times, June 11).

And last week, Russian lawmakers proposed a draft bill that would formalize Gazprom's monopoly over Russian gas exports (E&ENews PM, June 7).

"We recognize the importance of the principles of the energy charter" that would integrate Russia and the European Union, meeting participants said in a statement.

But Kudrin said after the talks, "Russia shares the principles of the energy charter, but the way they are formulated in the accord does not suit us." He said that while Europe is seeking reassurances about Russian supplies, Russia wants the same assurances of European demand before it will increase its investments in infrastructure.

"There's no production shock," he said. "It's consumption shock that is linked to lack of predictability of consumption. We need more trust." European customers lost considerable confidence in Russian energy supplies after Gazprom cut gas exports to Ukraine during a pricing dispute (Sebastian Smith, Agence France-Presse, June 11).

Russian negotiator Igor Shuvalov said Russia was prepared to use its leverage at the July meeting to get participants to agree that "energy security" for Russia entails allowing it greater access to investment in the West. Russia has delayed deciding who will get to explore its $12 billion Shtokman natural gas field because of rising tensions between U.S. and Russian officials (Greenwire, May 22).

"The summit should recognize that Russia plays a key role in providing energy security, and that Russia is ready to open its energy reserves to foreign investment," Shuvalov said. "We think that after this summit, no one will again question the membership of Russia in the G8" (Steven R. Weisman, New York Times).

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