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16 Oct, 2007 11:44

Russia and EU hope to untangle energy knot

A meeting between Russia's Minister of Energy, Viktor Khristenko, and the European Commissioner for Energy, Andris Piebalgs has wrapped up in Brussels. Topping the agenda were ways to maintain the energy dialogue between Russia and the EU.

The ministers have agreed to give each other more time before establishing their official positions on the EU´s proposed legislation, unbundling its energy assets.

The EU is committed to separating production and retail assets in the gas and electricity sectors in Europe.

The controversial part of this new legislation is a clause calling for tougher conditions for non-EU companies willing to buy in.  

This, obviously, is not popular with Russia’s gas monopoly Gazprom which is very eager to up its stakes in Europe and not keen to separate its production and retail assets.

The European Commission insists that power assets, both gas and electricity, should be unbundled in Europe in order to increase competition, and recommends it for Russia as well.

Andris Piebalgs pointed to the success of the unbundling of Russia’s electricity network – Unified Energy System, or RAO UES – which is seen as the key to raising the investment for Russia’s badly-needed electricity reform.  

Viktor Khristenko, in his turn, said he took that on board. However, the Russian minister explained that there is a big difference between unbundling in the electricity sector and doing the same in the gas sector.

“The short-term market rules the situation in the electricity sector to a considerable extend, whereas it is a long-term market, and long-term supply schemes, that apply to the natural gas industry with a different scheme of guaranteeing, insuring and crediting the investment. Volumes and scales are different,” Mr Khristenko outlined.

There was a minor advance today when Andris Piebalgs said that an independent commission of experts would be reassessing the contention legislation before the EU applied its official position on how it is going to treat non-EU companies.

And despite today’s warm atmosphere, on Monday Mr Khristenko said that the EU-Russia energy relationship is imbalanced with an increasing number of foreign companies buying into Russian energy assets, whilst Gazprom is still not welcomed in making major acquisitions in Europe.

Nevertheless, the two sides say they are committed to dialogue and perhaps much more progress will be made when they meet for the official EU-Russia summit on October, 26 in Portugal’s Mafra.