Power shift

Russia's warning about gas shortages in the EU comes right Opec-style cartel with other major producers

Yuri Fedotov
guardian.co.uk, Sunday 28 December 2008 15.00 GMT

Britain was given a sharp reminder of the dangers to its energy supplies yesterday when Gazprom warned that western Europe could be hit by gas shortages. The Russian gas provider said a long-running row with Ukraine could disrupt supplies this winter.
The fears were raised 24 hours before Russia hosts a meeting of the world's major gas suppliers to set up an Opec-style production cartel that could push up the price of energy in Britain and elsewhere. Energy experts warned that the two events demonstrated that Russia was using energy as a political weapon, and argued Britain should accelerate its switch to renewable power in order to reduce its dependence on unpredictable carbon fuel suppliers.
Russia triggered fears of an energy "cold war" two years ago and again last year when it threatened to cut off gas first to the Ukraine and then to Belarus. This time Russia is threatening Ukraine over an alleged $2bn of arrears. Although Russia exports a relatively small amount of gas to Britain, such difficulties could push up prices for alternative supplies from Norway or elsewhere. Viktor Zubkov, who is Russia's first deputy minister as well as chairman of Gazprom, said: "We cannot rule out that the position of the Ukrainian side and certain steps, which are linked to gas transit through Ukrainian territory, could lead to a disruption of supply stability to Europe."
The Moscow company said it offered to let Kiev redeem its debt by allowing Gazprom to offset it against transit fees for next year. "So far no solution has been found because of the non-constructive position of the Ukrainian side," Zubkov said. About 80% of Russian gas exports to Europe flow through Ukraine, which insisted it would ensure the transit of supplies to European Union countries next year. "Ukraine is ready to give guarantees of uninterrupted gas supplies in 2009 to European gas consumers," said Oleksander Shlapak, chief economic aide to the Ukrainian president, Viktor Yushchenko.
The promise did little to reduce tensions. Andris Piebalgs, the EU energy commissioner, indicated he was ready to travel to Moscow early in the new year for emergency talks with the Russians and said he was "very worried". Meanwhile, a loose grouping of gas producers, known as the Gas Exporting Countries Forum, is to meet in Moscow tomorrow to sign a charter to formalise the organisation, officials at the Russian energy ministry said.
More than a dozen gas-exporting nations from around the world have been meeting since 2001, but the body has no formal membership or management. Experts from member states met last month to discuss the draft charter, and ministerial representatives are expected to sign it at the meeting, which has been driven by Russia in cooperation with Iran and Qatar. The three countries, which together account for nearly a third of the world's natural gas exports, agreed this year to form a "gas troika" for joint exploration and production, in a move that sent shock waves through importing nations.
Russian deputy prime minister Igor Sechin said last week the forum would work along similar lines to Opec, but that it would be wrong to see it as an attempt to corner the market and to force up prices. "The work that it does will be similar to that of Opec, but I want to stress that there is no talk now about any specific deals. It is simply a question of protecting the interests of producers and coordinating their work," Sechin said at the Opec ministerial meeting in Oran, Algeria, last week. David Clark, a former UK government adviser and chairman of the Russia Foundation thinktank, said he was concerned Russia and its energy allies were trying to carve up the market and further develop the use of energy as a political weapon.
"Despite the downward trend of oil and gas currently, the long-term supply-demand picture suggests that prices are going to rise and this is going to be a continuing problem," he said. "Britain and the European Union need to collectively pressure Russia to stand by its existing commitments to act as a responsible energy partner. But it also points up the need for countries such as Britain and North America to work together to find the kind of scientific fixes that will enable them to build a post-carbon future."
• Yuri Fedotov is the Russian ambassador to the UK