Daily Telegraph: Lucrative trade with Britain could be at stake

By Ben Quinn
Last Updated: 1:35am BST 23/05/2007

Even without the fallout from the Alexander Litvinenko affair, Anglo-Russian trade relations have been strained as a result of difficulties suffered by British energy companies such as Shell and BP.

A glance at trading figures shows that the stakes are high. Trade with Russia hit a peak in 2005, with annual turnover worth as much as £7 billion.

In the first nine months of last year Britain was still the biggest foreign investor in Russia with total investment worth £2.8 billion.

So it was unsurprising that Alistair Darling, the Trade Secretary, took a robust approach to diplomacy during a visit to Russia in February.

He warned authorities to “play by the rules” and ensure “legal certainty” for investors.

Mr Darling raised his concerns with Alexei Kudrin, the finance minister, that the ground rules were unclear for foreign investors.

He criticised the takeover of a majority stake in Shell’s Sakhalin-2 oil and gas project by Gazprom, the state-run energy company. BP’s problems at its Kovykta gas field in Siberia were also mentioned.

“What we have said is that people are now apprehensive, and it would be far better if these matters were settled in accordance with established laws,” Mr Darling said.

According to a report earlier this year by Rosprirodnadzor, the environmental watchdog in Russia, the TNK-BP Anglo-Russian venture was in breach of its licence because it had under-exploited the field.

Many experts suggested that the claim was meant to pressurise TNK-BP into giving Gazprom control of the field.

Shell’s Sakhalin-2 was hit by similar accusations, which faded away after Gazprom took a stake of 50 per cent plus one share.

Both issues are regarded by many as part of a campaign by the Kremlin to control the oil and gas sector. Many Russian officials are thought to feel aggrieved that some production-sharing deals were weighted in favour of the British after the economy opened up during the Nineties.

Last year, Tony Blair told Russia at an EU summit dinner: “There have to be clear rules that are obeyed on both sides.”

Acknowledging that supplies of energy from Russia would come into EU countries “in varying degrees”, he spoke of the importance of establishing “a diversity of supply” in anticipation of Britain losing its self-sufficiency in gas supply.

Meanwhile, Gazprom is said to be considering plans to sell direct to households in Britain. Other business analysts have suggested that they might either team up with UK energy producers to build power stations in Britain or try to take over Centrica.
 
http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/05/23/nspy223.xml

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