G8 grapples with world energy woes

Expensive oil and gas took centre stage as finance ministers from the world’s wealthiest nations met for talks in Russia, whose vast resources are regarded as part of the problem as well as the solution.

Ministers will discuss the rising demand for energy

Finance ministers of the Group of Eight countries began their talks over breakfast on Saturday, with a briefing from officials from the dynamic emerging economies of China, India, Brazil and South Africa.

The meeting will then switch its focus to the rising demand for energy as well as the difficulty of securing reliable supplies of oil and gas from regions often prone to instability.

Oil prices, twice as high as two years ago, are not expected to decline soon, and the stand-off with oil-rich Iran serves as a reminder of how vulnerable supply can be, as did a recent row between Russia and Ukraine that disrupted gas exports to Europe.

Russia has declared that energy security is a priority of its first annual term as G8 president, but is being asked to prove it is serious after a payment row with Ukraine that shut the taps on gas exports to Ukraine and Western Europe at the start of 2006.

Russian gas

Peer Steinbrueck, the German Finance Minister, said on arrival in Moscow that he saw “significant progress” in one of the areas that mostly interested Russia’s G8 partners – Russia’s willingness to liberalise a tightly controlled energy sector.

Germany already has a small stake in Russia’s Gazprom, a monopoly which is also the world’s largest gas producer, and supplies a quarter of Europe’s gas, mostly via Ukraine.

For Putin, the presidency of the G8 is a positive move For Putin, the presidency of the G8 is a positive move

For Putin, the presidency of the
G8 is a positive move

The problem goes further in a time when oil too is a worry, with prices of more than $60 a barrel.

Japanese Finance Minister, Sadakazu Tanigaki, said: “Given the high level of oil prices we need to think about how to secure stable energy supply,”

A US official said the G8 was pushing to create a more stable world market for energy.

The official said: “We as finance ministers will continue to press for greater transparency, better quality of data, better understanding of how market mechanisms are working or not working and how we might address market failures.” 

Low expectations

Officials said they expected little in the way of concrete developments to emerge from the Moscow meeting, but said it was clear France and other European members of the G8 wanted Moscow to allow more foreign investment and loosen the monopoly of the Russian energy company, Gazprom.

Japan's Sadakazu Tanigaki: Weneed to secure energy supplies  Japan’s Sadakazu Tanigaki: Weneed to secure energy supplies  

Japan’s Sadakazu Tanigaki: We
need to secure energy supplies  

That would involve Russia ratifying an international charter on the matter, something many people say will not happen soon.

Russia’s number two oil official Sergei Oganesyan was quick to dismiss the idea of an end to Gazprom’s monopoly before the G8 ministers even arrived in the Russian capital.

Oganesyan said: “There is and there will continue to be a monopoly.” 

Gazprom does not allow others to export gas to Europe or to even produce more than it is prepared to accept in trunk pipelines, all of which are under its control.

This poses a problem for other G8 countries – the United States, Japan, Canada, Germany, France, Britain and Italy.
Investment analysts believe Russia has little incentive to heed calls for liberalisation of its energy sector however.

For Putin, the presidency of the G8 is a celebration of his country’s transformation after the collapse of the Soviet Union, but the other finance ministers still do not consider Russia an equal, mindful that it went to the brink of financial ruin and debt default in 1998 even if it is rich in oil and gas.

Source: Reuters

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