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Financial Times: EU urges Putin to honour oil contracts

By George Parker in Lahti

Published: October 20 2006 18:53 | Last updated: October 21 2006 00:55

European leaders on Friday night pressed Vladimir Putin, Russia’s president, to honour contracts with western oil companies, amid fears in the EU over Moscow’s tightening grip on the energy sector.

In a strained summit dinner in the Finnish town of Lahti, EU leaders also chided Mr Putin on questions of human rights, press freedom and Moscow’s tough treatment of the former Soviet republic of Georgia.

The meeting with Mr Putin served as a reminder to European leaders that their attempt to build a more equal energy partnership with Russia has so far yielded few positive results.

Instead of encouraging European investment in Russia, Moscow has questioned contracts signed in the 1990s by companies including Royal Dutch Shell and Total. This month it also shut foreign capital out of the development of the huge Shtokman gas field.

In spite of the differences among EU member states in their relations with Moscow, some leaders bit their tongues at last night’s dinner. They jointly argued that Mr Putin should treat western companies fairly if he wants Russian companies to have greater access to European markets.

“We offer security in contracts and we expect the same from Russia, namely also legal security in contracts and access to the Russian market,” Angela Merkel, German chancellor, said before the dinner.

Tony Blair, Britain’s prime minister, called for a “two-way street” in investment, in spite of criticism that he has already signalled that Gazprom could be considered as a buyer for Centrica, the British gas company, without reciprocal market opening in Russia.

Mr Putin said that he had no intention of bowing to European demands that Russia should open Gazprom’s pipelines to other companies, as required under the energy charter treaty, which Russia has signed but has not ratified.

He also defended Russia’s decision to clamp down on “environmental breaches” by Royal Dutch Shell in the Sakhalin 2 field, and said he hoped foreign companies could be involved later in the Shtokman project.

Mr Putin also issued an uncompromising warning to Georgia to calm a dispute with Russian-backed breakaway regions in the former Soviet republic, claiming it could end in “disaster and bloodshed”.

Faced with their implacable dinner guest, the EU’s 25 heads of government had spent much of lunch discussing how to present a common line to the Russian president. Matti Vanhanen, Finland’s president, said they succeeded: “We were very united,” he said.

José Manuel Barroso, European Commission president, said Russia and the EU needed a partnership based on reciprocity, openness, transparency, non-discrimination and market prices.

“We cannot allow energy to divide Europe as communism once did,” he said.

The timing of Mr Putin’s appearance as the guest of honour at the EU summit was viewed as awkward by many European diplomats.

Russia’s dealings with western oil companies, its tough treatment of Georgians living within Russian borders and the assassination of the journalist Anna Politkovskaya have all caused increasing concern in Europe.

On Friday Mr Barroso was forced to justify why the EU was honouring a leader who was overheard on Thursday joking that he “envied” the Israeli president, who is facing rape allegations.

The Russian Kommersant daily newspaper quoted Mr Putin, a former KGB agent, as saying: “He turns out to be a really powerful guy! He raped 10 women!” The Kremlin said his attempt at humour had been lost in translation.

Copyright The Financial Times Limited 2006

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