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Interview with Minister of Industry and Energy Viktor Khristenko on the Upcoming G8 Summit

01.01.70

VIKTOR KHRISTENKO, RUSSIA'S INDUSTRY AND ENERGY MINISTER: "G8 MEETING IS NOT A TRADING FLOOR" In two months, a meeting of the G8, the leaders of the world's most powerful countries, will open in St. Petersburg. Russia which presides in the G8 this year has chosen global energy security as the key topic. But Russian companies' willingness to enter the European energy sector has sparked protests there. Industry and Energy Minister Viktor Khristenko comments to Izvestia's Fyodor Chaika on the way the Russian government understands energy security and on key issues to be discussed during the summit meeting.

Q: What is your understanding of energy security?

Khristenko: I would liken energy security to road traffic security -- we cannot know what there is behind the next turn. But we can feel safer if there are clear and transparent rules in place for everyone -- if there are clear signs and road marking. Virtually every player in the market now has own, personal "traffic rules". If we manage to read and understand all those "individual rules", it will be possible to try to integrate them into the "global energy development rules".

Q: Why has Russia chosen energy security in particular as the key topic for the G8 summit?

Khristenko: Russia is the biggest producer, major consumer and shipper of energy resources. Therefore, in principle, we can understand everyone, we can integrate in a system manner -- at least in our minds -- all key positions, if they are not just a concentrated expression of our "national energy egoism". Like no other country, we can see growing risks related to the energy chain, those we and other countries face today, especially given that global economic development now depends on energy.

Q: What will "bargaining" focus on during the upcoming G8 summit in St. Petersburg?

Khristenko: The G8 is not a trading floor. During the meeting, plans call for evaluating energy security and risks in the energy sphere for the whole world, not just G8 member countries. Moreover, the G8 member countries alone are not enough to adequately influence risks related to energy security. It might be possible to deliberate on Russia's role in the energy world, but it is clear that it is also necessary to discuss those issues with OPEC, for example, and with other major gas and oil producers. Besides, the biggest consumers -- China and India -- should also be present at the negotiating table. Without them, discussions and decisions will not lead to anything good and there will be no global security.

Q: Will shortages of Russian energy resources be discussed?

Khristenko: Everyone, not just Europeans, is concerned about potential shortages of resources -- not just Russian resources -- today. The world, the market live in anticipation of shortages of resources, and the price trend confirms this to a certain measure -- I mean current oil prices. But the issue of shortages is the issue of transparency. I understand the logic of consumers. They need to know how much oil and gas we have. For example, we estimate our own resources, in terms of oil, at 13 percent of global resources. The International Energy Agency evaluates them at 8 percent of global reserves. They are two different figures, and the estimates differ by nearly two times. Every time, when you do sums, a question arises: are you a seller or buyer? Differences in risk and reserve evaluation lead to speculations in the market, to endless price fluctuations.

Q: Foreigners want us to tell them how much oil and gas we have. What questions do you ask in turn?

Khristenko: We ask them: "Is demand transparent?" The thing is that to be able to remove producer risks, we also need guaranteed transparency. We want to understand and accurately assess consumer countries' policy from the point of view of management of demand and its dynamics. Each country does it in its own manner -- Europeans proceed from one paradigm of demand management, while the Americans proceed from a different one. The term "transparency" is not less important for the market, for global stability. We would like to add clarity to issues related to the creation of fuel reserves, to know who manages them so there would be no speculations now influencing the market. As producers, we would like to know the policy in the sphere of processing. Are there shortages of refining capacities, making it impossible to meet growing demand? This should be clear.
All those answers -- from the state of mineral resources to that of filling stations -- should be clear.

Q: Europeans would prefer entering the Russian gas transport system, while opening their markets, in turn. Is this possible?

Khristenko: We are saying that today risks should be shared between business and the state, as well as they should be shared among various businesses. For this to be done, cross-ownership of assets is required, which also means risk sharing. The current level and scope of investment in projects is different in principle from that five or ten years ago. For instance, the construction of the Baltic Pipeline System, which has been commissioned recently, cost $2.2 billion. The construction of Phase One of the Eastern Siberia- Pacific Pipeline is estimated at $6.6 billion, while the cost of the whole project will reach $11.5 billion. And the level of risks is different from that five to ten years ago. In this case, this is not about haggling between Russia and the EU during the G8 summit. True, Russia and the EU will have a different floor -- the Russia-EU summit will be held in Russia at the end of May and will certainly discuss energy, along with other issues.

Expert opinion

Halter Marek

02.12.06

Halter Marek
Le College de France
Olivier Giscard dEstaing

02.12.06

Olivier Giscard dEstaing
COPAM, France
Mika Ohbayashi

02.12.06

Mika Ohbayashi
Institute for Sustainable Energy Poliy
Bill Pace

02.12.06

Bill Pace
World Federalist Movement - Institute for Global Policy
Peter I. Hajnal

01.12.06

Peter I. Hajnal
Toronto University, G8 Research Group