Sunday Telegraph: Russian bullying over oil is ‘a wake-up call’

(From right: Jeroen van der Veer of Royal Dutch Shell, Yuri Trutnev, Russia’s resources minister, and Stanislav Tsygankov of Gazprom)

Melissa Kite and Nicholas Holdsworth in Moscow,
Last Updated: 12:37am GMT 24/12/2006

Russia’s use of energy supplies as a political weapon should be a wake-up call to Britain and the West to deal urgently with the threat, senior Conservatives said last night.  

Liam Fox, the shadow defence secretary, stepped up Tory calls for a Nato-style “energy pact” after Gazprom, Russia’s state-controlled energy giant, forced the pro-Western former Soviet republic of Georgia to accept a doubling of gas prices.

“While the West has been focused on the Middle East, we have seen the resurgence of Russian nationalism and a willingness to use natural resources as a political weapon,” he said. “Given the nature of Russia’s political leadership, this is hardly surprising. Following events in Ukraine, and now Georgia, it is high time for a wake-up call to western politicians. We have been warned.”

Georgia declared the price increase “unacceptable” and “politically motivated” but was forced to accept when Russia threatened to cut off supplies. Last night the president of Azerbaijan, another former Soviet republic that is being asked to pay twice the price for its gas, accused the Russian company of “ugly” behaviour and said his country would not be bullied into accepting. President Ilham Aliev said that if Moscow insisted on doubling the price of gas to $230 (£117) per thousand cubic metres, Azerbaijan would be forced to “change the balance of power” and rely on its own oil reserves instead. That might mean restricting Azerbaijan’s oil exports, which pass through Russia, in order to fuel domestic power stations, he said.

Although Azerbaijan produces only half the natural gas it needs, Mr Aliev told a Russian radio station, it would not give in to Moscow. “To take advantage of this deficiency is ugly,” he said.

In the first sign of a regional backlash, he attacked Russia’s use of energy as a tool of foreign policy, although he was careful not to name or criticise President Vladimir Putin personally. The price of oil and gas should “be a commercial matter”, immune from attempts to “politicise it”, Mr Aliev said.

The move by the Russian company is being portrayed by the Kremlin as merely bringing the price paid by former Soviet neighbours nearer to the market price paid in western Europe – up to $300 per 1,000 cubic metres. But it has used its clout as a supplier of cut-price energy to try to force its neighbours into line on foreign and economic affairs.

European Union officials are alarmed at the heavy-handed tactics used by Moscow, which dramatically cut supplies and doubled the price of gas to out-of-favour Ukraine at the beginning of the year.

Gazprom already owns 25 per cent of the European gas market and bought Pennine Natural Gas in Britain this year. There are suggestions that it wants to take over Centrica, the owner of British Gas. It waged a campaign of bureaucratic harassment against Royal Dutch Shell until the company agreed to hand over control of a lucrative new project, Sakhalin-2, in north-east Russia last week.

Dr Fox said that the West had been ignoring the threat posed by Russia to energy security for too long. He has called on both Nato and the EU to “come together as a consortium of energy consumers to bring their collective weight to bear”.

Alexander Medvedev, head of exports at Gazprom, said: “Despite the rhetoric of some politicians that Gazprom’s price request is politically motivated, economic sense has prevailed and commercial companies have signed contracts.”
 
http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2006/12/24/noil24.xml

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