Zee Beam News

Thursday, March 16, 2006 Itar-Tass by Stephen Boykewich - Bodman speaking in Moscow ahead of talks Wednesday with G8 ministers. U.S. Energy Secretary Samuel Bodman called Wednesday for renewed energy ties and new joint projects with Russia, saying he would push the Group of Eight energy ministers to liberalize markets as they began two days of talks in Moscow. "We are stressing the need for all G8 nations to employ a market-based approach to achieving greater energy security that encourages production, that encourages competition," Bodman told reporters ahead of the talks. His comments came a day after Industry and Energy Minister Viktor Khristenko dug in his heels against European calls for gas market liberalization and accused the United States of blocking Russian bids for U.S. energy projects. Russia and the West appear to be increasingly at loggerheads over global energy security -- the stated priority of Russia's G8 presidency this year -- as ministers met for the second major event leading up to July's G8 summit in St. Petersburg. Joining the G8 ministers for talks were energy officials from China, India, Brazil, Mexico and South Africa, as well as representatives of OPEC, the International Energy Agency and the World Bank. Khristenko on Tuesday dismissed renewed European calls for Russia to ratify the Energy Charter, a treaty that forbids member countries from cutting energy shipments during price disputes. Ratifying the treaty would prohibit Russia from unilaterally cutting off gas supplies, as it did to Ukraine and Moldova in January, and would allow foreign companies to dispute Gazprom's exclusive use of Russian gas pipelines in international arbitration court. European Commission president Jose Manuel Barroso plans to push President Vladimir Putin on ratification of the treaty when the two meet this Friday, Reuters reported. Forty-six of the charter's 51 signatories, which include virtually every country in Europe and northern Asia, Japan, and Australia, ratified the charter between 1995 and 2002. Andre Mernier, head of the Brussels-based Energy Charter Secretariat, said Tuesday at a Moscow conference on international energy security that the treaty was based on "national sovereignty over energy resources." He acknowledged, however, that "when Russian companies approach the Secretariat and ask whether they can protect their interests under the Energy Charter Treaty, we can provide only a cautious response." Khristenko's response was far from cautious when asked at a news conference Tuesday whether Russia planned further liberalization of its energy markets. "As far as liberalizing the market, the question must be answered: What does this mean? Free access for whom? You don't plan on liberalizing your home," Khristenko said. Khristenko said Russia had already done enough to liberalize its gas market by lifting the so-called "ring fence" that had restricted foreign investment in Gazprom until this year. When asked whether he would push Russia to ratify the Energy Charter and liberalize Gazprom, Bodman said, "I would not encourage the Russian government or the Russian people to do anything they don't believe is in their interest." Bodman rejected Khristenko's claim that U.S. regulators were making it "virtually impossible" for Russian energy companies to work on projects in the United States involving the re-gasification of liquefied natural gas, or LNG. LNG is the cornerstone of Russia's plans to expand energy supplies to the United States, but the United States currently has limited capacity to re-gasify imported fuel for industrial or household use. Bodman said there were currently 20 licenses under review for U.S. companies to build new re-gasification plants, and that he encouraged Russian companies either to enter partnerships with these companies or to pursue sole ownership and operation of their own plants in the United States. "I'd certainly encourage it if that's what they want to do," he said. Bodman urged Russia to speed development of the Shtokman project, a huge Barents Sea gas field in which U.S. oil majors Chevron and ConocoPhillips are seeking a stake. Gazprom has said it will announce two or three partners to develop the field, which is thought to contain 3.2 trillion cubic meters of gas, by April 15. Gas from the project would reach the United States as LNG. The United States also wants to see quick resolution of a dispute blocking Kazakhstan from shipping more oil to Western markets via Russia though the Chevron-led Caspian Pipeline, in which Russia is the largest shareholder. Russia is currently blocking the pipeline expansion, citing corporate governance concerns. Though President George W. Bush has called for reduced U.S. dependence on foreign energy sources, Washington's current priority is "making the widest supply available" and letting the market decide how to use it, Bodman said. Aside from maximizing supply, the G8 should defend against energy crises by coordinating emergency fuel stocks, securing infrastructure and diversifying energy transit routes, Bodman said. Bodman held separate meetings on energy cooperation with Khristenko and First Deputy Prime Minister and Gazprom board chairman Dmitry Medvedev later Wednesday. U.S. Deputy Commerce Secretary David Sampson held a similar meeting with LUKoil CEO Vagit Alekperov, Interfax reported. Chris Weafer, Alfa Bank chief strategist, said that Sampson's subsequent announcement that a bilateral agreement on Russia's accession to the World Trade Organization was weeks away should come as no surprise in the context of the energy talks. Aside from stated U.S. concerns about intellectual property rights enforcement in Russia, "it has always been thought that the real stumbling block for U.S. approval of Russia's WTO membership has been the lack of a specific energy deal" between the two countries, Weafer said Wednesday. But with U.S. participation in Shtokman likely and joint oil projects on the horizon as well, "that deal is coming," Weafer said. U.S.-Russia energy relations went cold after the 2003 arrest of Mikhail Khodorkovsky, the former Yukos CEO who had been negotiating the sale of a blocking stake in Yukos with U.S. oil giants ExxonMobil and Chevron.