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Foreign Ministry: Russia rules out double standards


The Russian Ministry of Foreign Affairs believes that Gazprom will have no difficulty in reaching agreement with its partners from the European Union countries.

On the eve of the Russia-EU summit in Sochi, Andrei Kondakov, director of the Ministry of Foreign Affairs Department for Economic Cooperation, spoke with Vzglyad newspaper about the global energy security concept that Russia is proposing to its G8 partners. The Ministry believes that the EU does not always follow the principles of energy-market liberalisation.

Andrei Lvovich, what stage are you at now with development of Russia's version of the global energy security concept?

- The concept's elaboration began in the middle of last year, after the theme was identified by Vladimir Putin as a priority issue for discussion during Russia's G8 presidency.

At the G8 summit in Saint Petersburg a declaration on energy security is to be proposed for ratification, which will formulate key goals and tasks to be resolved in the near future, as well as a specific action plan for their realisation.

Drafts of these documents are currently under active discussion with our partners. Several meetings have already been held in Moscow for political Sherpas and Sous Sherpas, at which brainstorming sessions took place with the purpose of agreement on key elements of the joint declaration on energy security.

Russia is the only G8 country with high potential for supply of energy resources on the global market.
The general ideology, structure and themes that we propose for most sections of the declaration and its action plan have already received the approval of our G8 partners. The work on them is now at the stage of editorial correction. We believe that we will be able to bring this work to its logical conclusion at the remaining pre-summit preparatory meetings.

What proposals will be tabled for discussion by the G8 leaders?

- The G8's documents envisage global energy security as long-term reliable and economically acceptable provision of an optimal combination of different types of energy for sustainable economic and social development of the world with a minimum of environmental damage.

Discussion of energy security problems is, I believe, particularly relevant at present owing to the current lack of stability on the energy market. The reasons for this uncertainty include: depletion of traditional easily accessible energy sources; lack of investment in various sectors of the energy industry, primarily exploration, as well as processing capacity; growth in demand for energy resources, particularly from new consumer countries; political instability in a range of key extraction zones; and exposure of energy infrastructure to the threat of natural disasters and terrorist acts.

In 2006 the G8, under Russian presidency, is searching for ways out of the current situation. In this connection, actions are proposed in the following directions.

Achieve lessened price volatility on the global energy market by increasing its transparency. The more transparency there is, the more trust there will be between market players, with a consequent fall in speculation.

Facilitate attraction of investment in all sectors and at all stages of the energy-production process. This will assist in expansion of the resource base, increased reliability of supplies, and reduction of certain bottlenecks in the global fuel and energy sector.

Raise the effectiveness of economies and encourage implementation of energy-saving technologies. As we all know, energy saved means less energy produced.

Facilitate diversification of energy sources, including development of new and renewable energy types. This will assist in stabilisation of the global energy market, resolution of environmental problems, and raising energy supplies for developing countries.

Eradicate energy poverty in developing countries, where there is a significant lack of modern energy services. Primary sources are mainly used in these countries, which causes particular environmental pollution, and traditional sources are used very ineffectively.

Also, continue realisation of the action plan ratified at last year's G8 summit at Gleneagles, which was targeted at preventing climate change caused by human activity, primarily in the field of energy generation.

What is the main source of disagreement with our G8 partners with regard to agreement on the energy security concept, and how do we overcome differences?

- Of course, clashes of interest often arise during discussions on document preparation. And not only between Russia and its G8 partners, but between other club members too. As the summit comes closer the intensity of exchanges of opinions on energy issues also increases. This is connected to the necessity when forming commitments of taking into account not only the interests of the other dialogue participants, but also those of the entire global community. But no problem ever goes unsolved. I am sure that multilateral dialogue between the G8 will allow us to remove all remaining problems.

Is there any fundamental distinction between Russia's conception of the foundations of global energy security and that of its G8 partners?

- Discussion of the summary document for the Saint Petersburg summit did reveal certain divergences of viewpoints with regard to the global energy security concept. Russia is the only G8 country with high potential for supply of energy resources on the global market. Therefore, the concept of 'secure demand' is highly significant for us, whereas our partners are more concerned about 'secure supply'.

Also, as I have already said, the structure of the summary document on energy has already been fundamentally agreed, and at the present stage hardly any conceptual disagreements remain with regard to ways of ensuring energy security.

How can the heightened criticism of Gazprom's market strategy from European political and business circles on the eve of the summit be explained?

- I believe that this reaction from the Europeans is primarily due to the short-term fall in pressure in the Western export gas pipeline at the start of this year. Gas is an important component of the energy systems of most European countries, including with regard to heating for housing. In view of the unusually cold winter in 2005-6, even the smallest interruptions in supply were met with a tempestuous reaction from the public and media. Who wants to live in a badly heated apartment?

But the problems were solved easily, and as 40 years' experience working with the West shows, Gazprom is and will continue to be a reliable supplier of natural gas on Europe's energy markets. The best answer to the criticism received was the price growth in Gazprom shares. One example of the farsightedness of Gazprom's policy is the recent commencement of construction of the Northern European Pipeline.

Were the allegations of double standards for the EU and Russia in terms of energy-market regulation justified?

- Energy-market regulation in Russia is subject to the logic of defence of national interests based on use of market mechanisms, and excludes application of any kind of double standards in this field. But it's no secret that certain aspects of law-enforcement practice are subject to criticism from foreign investors operating on the Russian market. But even they cannot deny that we are currently working on improvements to the legislative base for the purpose of bringing it into compliance with international standards.

As regards the European Union, unfortunately it must be acknowledged that the actions of many European countries do not always conform to the declared principle of energy-market liberalisation. The most recent examples in this regard are the situation surrounding the acquisition of the German company E ON by Spain's Indesa, and the clash which is unfolding around the acquisition of Arcelor by the metals gianl Mittal. In the light of this, we can talk about a practice of application of double standards, not only in relation to other countries, but also inside EU member states themselves.

Reports of opposition to Gazprom's potential acquisition of gas-distribution assets in the United Kingdom have also attracted attention.

Often when talk turns to admission of our companies to the internal EU energy services market, insurmountable protective barriers rise up in front of us. This affects both the hydrocarbon sector of the energy industry, where a secretive system of quotas for purchases from Russia is operated, and atomic energy, where unfavourable conditions restrict access to the Western European market for Russian nuclear fuel cycle goods.

How would you evaluate Gazprom's policy of exchanging extraction assets in Russia for transport infrastructure abroad? Does it open up prospects for Russian economic diplomacy?

- I believe that the process of mutual integration is extremely useful in achieving the goals of energy security, as it enables development of healthy competition. This does not only affect Russia and the countries of Europe, but also applies to all players on the international energy market. Lowering barriers to mutual investment by both producers and consumers of energy resources will result in raised stability of energy markets, as it will facilitate growth in mutual trust.

To answer the second part of the question, I would emphasise that trust-based relations are also extremely important in economic diplomacy, as it is always easier to hold negotiations with a benevolent counter-party than a hostile one.

Would entry of foreign energy concerns to the Russian domestic market conform with Russia's national interests?

- The widespread fear of entry by foreign energy companies is, in my opinion, connected with the imperfection of the Russian legislation in this field. If a clear legal framework is established, giving the state, Russian companies and foreign partners the opportunity to receive profit, this would only be beneficial to the national interests of Russia. Foreign companies often have experience, technology and expertise allowing them to use resources more effectively. Exchange of experience in this connection would be extremely useful for Russia.

There is no cause for us to be afraid of the prospect of foreign partners operating on our internal market, and we are continuing to form the clear and transparent legal base required for this.

Unofficial translation from Russian

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