Putin warns EU energy laws hurt business

barroso_putin_03.jpg

Russian Prime Minister Vladimir Putin warned yesterday (25 November) that European legislation aimed at liberalising energy markets could hinder investment and undermine future cooperation with the European Union.

Putin, whose comments were published in Germany's Sueddeutsche Zeitung newspaper a day before talks with Chancellor Angela Merkel in Berlin, said the legislation would undermine investment eventually lead to energy shortages.

"It creates serious risks in the European energy sector and undermines investors' plans to put their money into new projects," Putin said in the article, warning that the plan will result in energy shortages and high prices.

"Remember, the poorly-thought out liberalisation of the financial markets in many ways provoked the crisis," he said. "We do not want the failures from regulating the gas sector to take us to a new crisis, this time, an energy crisis."

Access to Russia

Moscow was irked by the European Union's blocking of a Russian gas deal with Poland until EU authorities in Brussels had inspected the document and were happy that it complied with liberalisation laws.

The liberalisation of EU energy markets has eroded some of the profits that were anticipated in European gas pipelines, but analysts say investors in new projects have so far found it easy to agree exemptions that make their investments worthwhile.

But Putin hinted that limiting Russian investment in the European Union could prevent asset swaps that could give European energy companies access to Russia's vast energy reserves.

"If we unite our efforts we could not only trade energy resources, but hold asset swaps [and] jointly work at all stages of the technological chain – from exploration and production to delivery to consumers," Putin said.

Russia has announced plans to privatise state-owned assets worth $32 billion over the next three years and has reserved some of the assets, including a 10% stake in oil major Rosneft, for potential asset swaps.

During his visit to Germany on Friday, Putin is likely to discuss a plan by Germany's E.ON to sell a $4.5 billion stake in Russian gas giant Gazprom to Russia's VEB state corporation.

E.ON's 3.5% stake in Gazprom may also be used for asset swaps, a strategy Russia is using to break into new foreign markets.

Putin said that Russia and the European Union, which accounts for half of Russia's foreign trade, should have a common industrial policy and called for technical regulations and customs rules to be unified.

Common market?

"What are we proposing?[…] The creation of a harmonious community of economies from Lisbon to Vladivostok," Putin said, referring to Russia's far eastern city.

"And in the future, possibly, a free-trade zone and even more advanced forms of economic integration," Putin said, adding that Russia and the European Union should work to remove all remaining obstacles to Russia's 17-year-old bid to join the World Trade Organisation.

(EURACTIV with Reuters.)

German Chancellor Angela Merkel responded by lambasting Russia's protectionist trade measures, which are hurting German exports, and said that Putin's policies contradicted his stated aim of creating a free-trade zone stretching from Lisbon to Vladivostok.

"The steps that Russia has taken recently do not exactly point in that direction," Merkel told reporters. "I hear time and again from Russia that import duties are being repeatedly raised without warning."

Merkel also criticised Putin's pet project of a customs union between ex-Soviet neighbours Russia, Belarus and Kazakhstan, saying the union made a trade agreement with the EU more difficult.

The European Union agreed in March 2009 to liberalise energy markets by splitting giant utilities, ensuring that small gas suppliers can get unhindered access to European infrastructure and compete on an equal footing with the dominant players.

The deal included a so-called 'Gazprom Clause' designed to prevent companies from outside the bloc - such as Russia's state-controlled gas giant Gazprom - from buying up strategic distribution networks without approval by governments.

Subscribe to our newsletters

Subscribe