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28th Mar 2024

EU gives wary backing to G8's 'new global energy order'

  • The G8 focused on energy in 2006, after making big promises on Africa last year (Photo: http://g8russia.ru/)

Open oil and gas markets and more nuclear power will form the backbone of the industrialised world's new energy policy, with the EU welcoming the deal but urging Russia to make good on promises made in St Petersburg on 16 July.

The G8 club - the US, Russia, Germany, UK, France, Italy, Canada and Japan – on Sunday shook hands on a statement saying "it is extremely important that companies from energy producing countries can invest in and acquire upstream and downstream assets internationally."

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Fossil fuels will meet 80 percent of the world's energy needs in 2030 - the G8 leaders predict - with open markets needed to get big companies to invest the "trillions of dollars" needed to suck more oil and gas out of the ground and to stabilise soaring prices.

The US, UK and France's push for strong pro-nuclear language was softened due to Germany and Italy's long-standing anti-nuclear promises to voters back home. But the text still said nuclear energy will "contribute" to energy security and CO2 reductions.

"Previously, energy security meant stable supply of resources to the main consumers. Now we have convinced our partners it is a much broader concept that extends to the extraction, transport and sale of energy," Russian president Vladimir Putin said.

He defended Russia's credibility on market economy values, adding "Russian natural gas prices are set not in the Kremlin through some kind of unilateral decision, but are determined by the market."

The G8 deal takes the EU's new energy policy – as agreed in Brussels in March – to a global level, European Commission president Jose Manuel Barroso told EUobserver. "It's a new global energy order," he said.

"I believe the principles that we want to implement in Europe are the same as we are seeing at the G8 – openness, transparency, solidarity, efficiency, a predictable regulatory environment" the president added.

He also sounded a note of caution about the EU's biggest oil and gas supplier – Russia – however. "Russia now has some responsibility. [The G8 deal] is not enough. Now we have to translate this into reality," Mr Barroso said, mentioning the Energy Charter Treaty.

Promises, promises

The charter treaty is a draft 1994 agreement designed to break Russia's monopoly on exports of cheap Central Asian gas from the Caspian Basin, and is emerging as a key test of Moscow's goodwill on open energy market promises.

But the signs do not bode well so far. Russian diplomats made it clear as early as May that the G8 summit would not see a breakthrough on the charter's ratification. The Russian parliament on 5 July passed a new bill giving legal status to Gazprom's de facto control of Russian gas exports.

Energy experts such as Ernst & Young's global utilities manager Ben van Gils believe that even ratification would not guarantee Russian implementation. And diplomats from some new EU member states believe Russian firms would sooner blow up their facilities in Kazakhstan than see them fall into EU hands.

Even the most liberal of the old EU15 don't trust Gazprom when it comes to running domestic supplies. The UK lets French firms supply electricity to London – including 10 Downing Street – but it reacted defensively to Gazprom's offer to buy gas distributor Centrica in February.

EU companies are a bit more adventurous - Germany's E.ON and BASF are building a major pipeline with Gazprom. BP recently invested $1 billion in Russian oil giant Rosneft's shares and France's Total and Chevron are bidding to help Gazprom develop Arctic Circle gas fields.

But questions over property ownership rights in Russia remain. Rosneft – whose president Sergei Bogdanchikov was wheeled out to journalists in St Petersburg to bang the new energy drum – profited heavily from the politically-motivated breakup of fellow oil firm Yukos.

Individual western businessmen such as UK investor Bill Browder - currently facing a Russian visa ban for unknown reasons - also lack trust in the Russian system. "I imagine that person may have violated our country's laws," Mr Putin said on Sunday, ruling out Mr Browder's return.

Climate change and Africa

If the EU remains wary about its new energy engagement with Russia, green groups have their own axe to grind over the G8's stress on managing fossil fuel supply instead of focusing on poverty and climate change.

"The best thing about the St Petersburg summit is that it's over," Greenpeace spokesman Tobias Muenchmeyer said. "The G8 needs to get serious on [climate change] or it will drift into irrelevance."

G8 cooperation statements on infectious diseases and education placed heavy emphasis on the developed world's concerns – bird flu and competitiveness – instead of third world problems such as HIV and basic literacy, with development NGOs such as Actionaid and DATA accusing summit leaders of letting Africa down after making big promises in 2005.

But UK diplomats assured press that Africa has not been forgotten. "We don't need new commitments because the commitments were made last year," a Downing Street spokesman told EUobserver. "We are keeping the [Africa] momentum going for the G8 in Germany next year."

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