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Analysis: Energy plan to benefit Russia

By STEFAN NICOLA, UPI Energy Correspondent

ST. PETERSBURG, Russia, July 17 (UPI) -- The energy security guidelines adopted Sunday by the Group of Eight leaders in St. Petersburg may end up benefiting Russia more than Europe, observers say.

"Russia has come out on top," Friedemann Mueller, energy expert at the German Institute for International and Security Affairs, a Berlin-based think tank, told United Press International in telephone interview on Monday. "The Europeans did not reach anything with respect to the Energy Charter or the transit protocol."

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Europe ahead of the summit had called on Moscow to finally ratify the Energy Charter, an international agreement aimed at integrating the energy sectors of the former Soviet Union and Eastern Europe into the broader world market.

While the agreement brokered in the framework of the G8 summit, hosted by Russia in St. Petersburg, does call for the implementation of open and transparent markets and urges both Western Europe and Russia to allow for more foreign investment, the agreement is not legally binding.

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Europe is nevertheless expected to make the first concession by granting companies like the Russian state-controlled energy giant Gazprom direct access to European consumers. Gazprom has repeatedly tried to purchase energy providers in Europe, but has faced stark European opposition.

Russian President Vladimir Putin counted the agreement as a success for supplier countries. Moscow is a key gas and oil seller on the world market.

"Previously, energy security was interpreted as meaning stable supply of energy resources to the main consumers," he said Sunday at a midnight conference. "Now we have convinced our partners that energy security is a much broader concept that extends to the extraction, transport and sale of energy. All these links in the chain, the representatives of all these links, bear equal and collective responsibility, and I think that this is very important."

Russian energy companies, such as Gazprom, may now have the option to purchase European refineries or energy providers, finally getting the downstream business they have aimed for during the past months. The likes of Gazprom have an extensive cash flow, and could make a competitive bidding for almost any company in Europe.

Mueller said letting state-controlled companies like Gazprom into Europe was "dangerous."

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With the move to open up downstream markets for Russian investors, the Europeans are "trying to get Russia to give third-party access to their pipelines," Robert Ebel, head of the energy program at the Center for Strategic and International Studies, a Washington-based think tank, told UPI Monday.

Mueller said, however, that energy companies in Germany have such a vested interest in dealing with Gazprom that consumer interests are "overlooked" in the process. Energy security, he added, had not been improved by the summit.

But other experts say the agreement was due to Russia's elevated position amid rising energy prices and the growing energy hunger from emerging economic superpowers such as India and China.

"Right now, Russia is in a uniquely good position," Alexander Rahr, Russia expert at the German Council on Foreign Relations, a Berlin-based think tank, told UPI Monday. "This agreement is a small step toward each other, not necessarily to get access to Russia's pipelines, but to increase economic links with Russia (and) to ensure dependable, long-term deliveries."

He said Western firms may now be increasingly included in Russian oil and gas projects.

"But the big pipelines will stay under Russian control," said Rahr.

While Rahr argues there is hardly a European energy future without Russia, Mueller said Germany should try to get off its addiction of expensive oil and gas, which are slated to become more expensive if international conflicts continue to escalate.

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"We have to look for a phase out of oil," Mueller said. "Berlin has to develop an exit strategy."

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