Friday, June 16, 2006


G8 Summit outcome in 2006?

The outcome of next month's G8 summit is guessed today by the Center for Strategic and International Studies in Washington. Moscow Times

Other than stepped-up rhetoric, it is unlikely that Western partners will have much influence over this agenda. . . In the energy sector, Russia retains the upper hand in decisions about how much, to whom and how it is going to deliver its natural resources. The agreement and subsequent start of construction of the North European Gas Pipeline marked the moment when Russia decided to use natural resources for political ends. The North European Gas Pipeline kills two birds with one stone: It makes the European Union even more dependent on Russian energy resources and East European countries less energy secure. It also shows former communist countries such as Poland that their anti-Russian rhetoric has a price.

Russia's right to determine its own market-economy rules, whether regarding energy or other forms of trade, is also likely to be restated. Putin's strong views on economic management from above were reiterated in his state-of-the-nation address in May. He attributed the growth and importance of the energy sector to the state's planning and management, not to market forces. It is unlikely that he will change his position; in fact, this philosophy explains the centralization of economic power witnessed under his leadership.

Tuesday, June 13, 2006


Energy Charter Treaty

More details of energy insecurity from the G8 meeting at the week-end. A Russian perspective on a key safeguard, the international Energy Charter Treaty, appears in the Moscow media. The view is the treaty coverage of transit and nuclear energy must be improved before the Duma will sign. But even more fundamentally, it is claimed the existing provisions aren't being enforced - Ukraine's transit default, for example.

Kudrin [Russia's Finance Minister] said the treaty failed to take into account the effect of EU enlargement on energy transit issues, or to address nuclear energy. He then used the treaty to lash out at Ukraine, saying that Ukraine had violated the treaty by siphoning off Russian gas meant for Europe after Gazprom cut supplies to Ukraine in January.

"Ukraine, unlike Russia, has ratified the Energy Charter. However, as a transit country, it allowed the unsanctioned siphoning of gas," thereby violating the Energy Charter, Kudrin said. "I'm amazed that this hasn't been noted in the West," he said.


4 July, 2006

Presidential aide Prikhodko says Energy Charter outdated

Russia has refused to ratify [the ECT] as Europe has demanded access for Central Asian states and other countries to Russian pipelines, which Moscow says will make their natural gas 50% cheaper than Russia's when it arrives in Europe.

Monday, June 12, 2006


St Petersburg - G8 Finance Ministers

Russia is prepared to sign a revised Energy Charter Treaty. This development was suggested at the weekend's meeting of G8 Finance Ministers. Energy Security

[Russia] agreed, for the first time, to the inclusion in the final communiqué of a reference to the Energy Charter - a development hailed as "major progress" by Thierry Breton, French finance minister. The charter, a legal document signed but not ratified by Russia, requires it to open up access to its pipelines for other countries.

[However Russia] disagreed with the charter's present form. [Russia's Finance Minister] said the document was out of date and needed to be changed to include nuclear energy and redefine rules of transit and investment.

[Moreover, the Minister] reiterated that Russia was a reliable supplier of energy, but turned the tables on consumers of Russian energy, saying they bore as much responsibility for energy security as did the producer. He said energy producers needed "the security of demand" to justify investment in production. "We have quite stable growth of energy supply, but we are encountering a demand shock."

The full Energy Charter Treaty can be read here. The introduction is here.

The Treaty’s provisions focus on five broad areas: the protection and promotion of foreign energy investments, based on the extension of national treatment, or most-favoured nation treatment (whichever is more favourable); free trade in energy materials, products and energy-related equipment, based on WTO rules; freedom of energy transit through pipelines and grids; reducing the negative environmental impact of the energy cycle through improving energy efficiency; and mechanisms for the resolution of State-to-State or Investor-to-State disputes.

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