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MosNews: British Trade Secretary Tells Russia to Stop Mixing Politics with Business

British Trade & Industry Secretary, Alistair Darling 

British Trade Secretary Alistair Darling / Photo: Stephen Mansfield

Created: 24.04.2007 15:50 MSK (GMT +3)

Russia must stop mixing politics with business and steer clear of economic nationalism, British Trade and Industry Secretary Alistair Darling said on Tuesday, April 24, speaking at the Russian Economic Forum in London that has been boycotted by top Russian officials and state-linked firms.

“Commercial considerations should be paramount. Oil and gas companies should not be used to exert political pressure,” Darling said, quoted by Reuters.

Over the past three years, state-controlled energy firms Gazprom and Rosneft have hugely increased their power, buying up assets and driving a hard bargain with foreign firms wanting a foothold in Russia.

Last week, as MosNews reported, British-Dutch oil major Royal Dutch/Shell ceded half of the $21.4 billion Sakhalin-2 oil and gas project to Gazprom.

Analysts say the transaction, done at a knock-down price of $7.45 billion, formed part of the Kremlin’s drive to take control of Russia’s vast mineral wealth and force out foreign competition, a trend also seen in several Latin American nations.

Russia is also re-routing major gas and oil pipelines to bypass neighboring states, such as Belarus and Poland, allowing it to shut down their supplies and concentrating the power over energy exports in the hands of state-controlled monopolies. Russian authorities say that re-routing is done to ensure uninterrupted deliveries to Western Europe.

“Around the world we are seeing an increasing trend towards protectionism, putting up barriers to trade that will make us all poorer,” Darling said. “We are seeing the growth of economic nationalism. It won’t work. Protectionism dressed up as patriotism is still protectionism.”

The Kremlin’s critics say in addition to bullying others with Russia’s oil and gas wealth, it has used a variety of underhand means to pursue its energy strategy, including trumped-up environmental claims, vastly inflated back-tax demands and rigged auctions.

After Shell, another British firm, BP Plc is widely seen to be next in the Kremlin’s sights, since its TNK-BP joint venture is the only big oil firm in Russia not majority owned by Russians and with no state ownership.

Gazprom is widely expected to buy into TNK-BP, despite repeated denials from TNK-BP’s owners, while Rosneft is expected to swallow up the bulk of its bankrupt rival Yukos, which is being sold off at a series of auctions.

Darling said investors needed to have trust in Russian law.

“We’ve got to be absolutely clear that the relationship between our two countries and between the European Union and Russia will only prosper if there’s legal certainty, there’s openness and that when people strike a deal, the deal is stuck to,” Darling told Reuters on the sidelines of the conference. “But I think it’s important that we engage with them in a positive way. Russia actually needs investment from outside. If it’s going to get that investment, we’ve got to be clear what the rules are.”

His audience was much diminished after the forum, the top international event on the Russian business calendar, was hit by a string of last-minute withdrawals, with top executives from state-controlled firms and government officials pulling out. Russian business daily Vedomosti reported last Friday, citing a source in one company, that President Putin asked government officials not to support “offshore gatherings”. Many business executives decided against attending, because forum presented them with a chance to convene with representatives of authorities. With top government officials absent from the gathering, the forum lost its attractiveness for many of the entrepreneurs, both from state-controlled and private companies.

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