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Interview with Alan Riley

The top issue at the Conference on Energy Security in the Lithuanian capital was finding alternatives to Russian supplies.  Alan Riley from London’s City University says liberalisation is a necessity in the energy market sector.

Russia Today: We were talking about the Gazprom reliability issue and reciprocity which you’ve developed at this conference. Could you give us some details?

Alan Riley: The key issue here is market liberalisation. A fundamental point, which a lot of people both in the EU and in Russia don’t understand, and particularly in the energy sector, is that market liberalisation is the real deal. It is really going to happen. The point simply is that it is not the energy department of the commission which deals with policy issues, it is the competition department and they have real power. They’ve already busted the airline industry open, they’ve busted the telecommunications industry open and then they are going to bust energy open.

The point that flows from that is if you're going to do that, you have real liberalisation, you are going to have to split the network from the supply. If you do that, you are going to have a massive asset sale of energy assets in the EU some time around 2011 once the legislation is adopted. If you do that, then you’ll have an issue about who is going to buy the assets. The problem is really that Russia has been closing parts of its markets, certain sectors of strategic assets. It is a real issue about Russia closing its markets as the EU was opening up for a big energy sale and you can see that is why reciprocity is becoming a big issue. And reciprocity essentially will mean that unless Russian energy markets open entirely to the EU companies, then there will be no access for the Russian companies to take part in a big EU sell-off.

RT: There has been a claim that the domestic gas prices will be liberalised. What could be the potential consequences of this on the domestic Russian market?

A.R.: I think that this is a very difficult issue. I know the Kremlin wants to do this. But if you take industrial prices, for example, I think it is a real lesson what happened to Ukraine. We’ve looked at the fertiliser industry in the Ukraine and it was more or less wiped out by the pricing crisis. The real question is whether parts of Russian industry which are very energy intensive, like fertilisers, like metals, like minerals, can easily switch to a more efficient point quickly enough to cope with any significant price rises. I think it is a really big issue both for Russian industry and for the Kremlin.