Wednesday, January 10, 2007

Putin attempts to calm EU's oil jitters

President Vladimir Putin yesterday sought to reassure Western consumers that they would not suffer energy shortages as a consequence of a row with Belarus that has disrupted Russian oil supplies to Europe.
The Russian leader urged his ministers to "do everything to secure the interests of Western consumers" after Moscow confirmed that it had cut oil shipments through the Druzhba pipeline that runs through its western neighbour.
However, Mr Putin ordered his government to look at winding down Russian production following the suspension on Sunday of the 2,500-mile pipeline.
Russia's state pipeline monopoly, Transneft, may sue the government in Minsk, which Moscow accuses of forcing the closure by stealing oil from the pipeline.
Mr Putin's remarks indicated his awareness of the adverse publicity caused by the row, which has seen crude oil supplies stopped to Poland, Germany, the Czech Republic, Hungary and Slovakia.
There is no alarm about imminent shortages in those countries thanks to warm weather and strategic stocks, but the Druzhba pipeline provides 12.5 per cent of the crude oil consumed by European countries.
Russia, the world's second largest oil exporter, is actively looking to expand business beyond its borders. In Britain, Gazprom, the Russian state-owned gas company, is strongly rumoured to be interested in acquiring a stake in Centrica, the largest gas supplier.
But the Russian leader's comments will only do so much to calm jitters in the EU, which is forecast to rely on Russia for 70 per cent of its energy by 2030.
Angela Merkel, the German chancellor, said the crisis destroyed confidence in Russia as a supplier of oil and natural gas.
"It is not acceptable when there are no consultations about such moves. That repeatedly destroys confidence and you cannot build cooperation based on true mutual trust in this way," she said. Jose Manuel Barroso, the commission president, also urged Russia and Belarus to find a quick solution to their dispute.
Belarus is insisting that Russia pay a fee for oil piped across its territory, but Moscow says the charge is illegal.
The current row follows a dispute last week over the doubling of heavily subsidised Russian gas prices for Belarus. Russia and Belarus have been close allies, with Moscow relying on Minsk as a military buffer between it and Nato. In the mid-1990s they signed a loose union treaty.
But analysts say the Kremlin has grown impatient at supporting authoritarian leader Alexander Lukashenko's regime while receiving little in return.
Last year Moscow cut off gas supplies to Ukraine in another pricing row, prompting EU policy makers to begin debating ways to reduce over-reliance on Russia for energy.
Efforts at "strategic consolidation" of reserves are likely to be redoubled now, while Germany will use its presidency to advocate more renewable energy and conservation.
Mrs Merkel had earlier demanded that taps on the Druzhba pipeline were re-opened, and announced plans to travel to Moscow on Jan 21 for talks with Mr Putin about a stalled treaty on political, economic and energy co-operation with the EU.
She noted that the EU had a "strategic partnership" with Russia.
"And when we look back on the last decades we see that even during the Cold War Russia has been a stable supplier of energy," she said.

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