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Gazprom accuses EU of 'double standards' and naivety

01.01.70

By Carl Mortished and Jeremy Page

ON THE eve of the G8 energy summit, Gazprom has accused the European Commission of setting double standards in energy security and rejected criticism of the companys actions in Ukraine in January as cold war rhetoric.

Speaking exclusively to The Times ahead of a meeting of G8 energy ministers, Alexander Medvedev, head of Gazproms export business, accused TNK-BP, the Russian arm of the British multinational, of being inexperienced in its handling of negotiations over gas exports to China. He accused Europe of failing to understand the gas industry, firmly rejecting calls from the European Commission for more competition on Gazproms export routes.

The head of Gazexport rounded on critics who accused the company of playing politics when it ceased exports to Ukraine on January 1, a move that led to temporary shortfalls in gas exports to Europe.

Its cold war rhetoric, Mr Medvedev said. Energy security is comprehensive. Its like a coin with two sides. Security of supply cannot be separated from security of demand.

Mr Medvedev was dismissive of the Energy Charter, a treaty aimed at freeing trade in energy, which Russia has signed but not yet ratified. One of the treatys aims is to guarantee freedom of energy transit. Mr Medvedev accused the signatory nations, saying: They have been completely silent in December and in the crisis days of January. We did not want help in commercial negotiations [with Ukraine], but we wanted [them to uphold] the basic rule that transit could not be mixed with supply.

Gazprom accused Ukraine of taking gas from transit pipelines during the brief supply cut-off and later in January after the two sides agreed a supply contract. Despite the signed documents, Ukraine did not take any steps to economise . . . the more gas we pumped into the system, the more gas they took out, Mr Medvedev said. They were allowed 130 million cubic metres in January and they took out 240. Eighty million is the consumption of an average-sized European country.

To accuse Gazprom of being a tool of Kremlin foreign policy was illogical, he said, pointing to the Gazprom projects to build pipelines to Europe. To create an instrument with billions of dollars of investment just to turn off the gas is not only stupid, but economically inefficient, he said.

Gazprom is no nearer a deal with TNK-BP over gas exports to China FROM `en_BP`s huge Kovykta field in Eastern Siberia. BPs Russian affiliate this week said it had offered Gazprom 51 per cent of the asset. However, Mr Medvedev said first gas exports to China were likely to come FROM `en_Sakhalin` or Western Siberia. BPs talks with the Chinese over pipeline routes were unhelpful. I believe they made a big mistake . . . it was the result of a lack of experience, he said Mr Medvedevs strong defence of Gazproms monopoly export status dismay those who blame the Russian utilitys long-term contracts for the lack of gas competition in Europe.

Gazprom retains its UK ambitions. A bid for Centrica is one of many options in the UK, he said. We are only dealing with publicly available information. I spoke to the Takeover Panel recently to explain to them how we would like to develop our business.

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