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Daily Telegraph: Business comment: Chance for Europe to challenge Putin’s energy stance

By Russell Hotten
Last Updated: 12:19am BST 02/06/2007

BP received a stay of execution on whether its Russian joint venture will continue to operate the vast Kovykta gas field, but no one should be in any doubt that the clock is ticking. TNK-BP’s involvement in Kovykta is going to cease or be substantially curtailed.

President Vladimir Putin is intent on renationalising energy resources and does not want revenues from a prize asset like Kovykta, which contains enough gas to power Europe for four years, flowing overseas.

Putin believes Russia’s energy assets were sold off too cheaply during the 1990s, and he wants them back. High oil and gas prices are, nevertheless, swelling the Kremlin’s coffers and helping to improve the living standards of Russians.

It has boosted Putin’s popularity at home, and created a self-confident Kremlin that is now asserting its power on the international stage.

The circumstances under which Yukos collapsed and the way state-run Gazprom took control of Sakhalin-2 from Royal Dutch Shell were highly dubious. The pressure being put on TNK-BP follows a pattern.

Russia’s emergence as an energy superpower and Europe’s increasing dependence on Gazprom gas is, somewhat belatedly, causing unease. By delaying a decision yesterday on whether to revoke TNK-BP’s licence to operate Kovykta, Russia has neatly avoided a potential row at next week’s G8 summit.

But this must not be allowed to neutralise the issue. It gives Western governments an opportunity to make one last appeal for good sense – and the rule of law. And the West is not without leverage. Although Europe needs Russian gas, Russia needs a market in which to sell.

Europe has yet to devise a coherent policy towards the Kremlin’s new-found power, preferring to let individual companies and countries do bilateral deals. The G8 would be a good venue for the major powers to start presenting a united front.

[email protected]graph.co.uk

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/06/02/ccom02.xml

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