EU looks to Russia to plug energy gap

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EU looks to Russia to plug energy gap By Michael Smith and Dan Bilefsky in Brussels Published: September 29 2000 19:21GMT | Last Updated: September 29 2000 19:40GMT

The European Union and Russia have started talks aimed at realising a big increase in European purchases of Russian energy supplies.

European Commission officials on Friday night suggested doubling imports of gas from 100m tonnes of oil equivalent a year and increases in other purchases including oil and electricity.

"We want to move quickly," said one, who described the initiative as the most significant commercial development between the EU and Russia in years.

The initiative comes amid growing anxiety in the EU about European countries' reliance on oil, prompted by the recent rise in prices to 10-year highs of well above $30 per barrel. On Friday, benchmark crude prices were trading just below $30, but still significantly ahead of target levels around $25.

It is understood that Romano Prodi, European Commission president, and Vladimir Putin, Russian president, discussed the idea of a "strategic partnership" on energy involving long-term contracts in telephone talks on Thursday night, and are keen to move ahead with discussions.

Mr Prodi briefed EU financial ministers about the initiative over lunch at their monthly meeting in Brussels yesterday.

Aides said Gerhard Schroder had shown enthusiasm and executives of oil companies who met Mr Prodi last week were also supportive.

Negotiations with Russia are likely to be fraught with complications. Agreements would have to cover the construction of new oil and gas pipelines and involve countries through which these would pass.

"The pipelines present a huge infrastructure problem," said one EU official.

The EU is also keen to develop the supply of liquefied gas from Russia.

Commission officials were talking on Friday night of a deal covering 20 years under which the EU could undertake obligations such as supplying technology to improve the exploitation of oil and gas reserves.

Any deal would enable the EU to diversify its energy sources while Russia would benefit from long-term contracts earning hard currency.

EU finance ministers on Friday held inconclusive discussions about the possibility of a co-ordinated release of emergency oil stocks to try to nudge prices lower, similar to a move announced by the US this month.

Under EU rules member states must keep 90 days of fuel supply in reserve and the Commission has estimated that EU member states have an average of 111 days.

http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT3FES28QDC&live=true&tagid=ZZZAFZAVA0C&subheading=europe

-- Martin Thompson (mthom1927@aol.com), September 29, 2000

Answers

This is very confusing. Obviously, it is a long-range plan, involving the construction of pipelines and such, which will probably not have a conclusive payoff for 5 years or more.

Question is what are they going to do now? The emergency is now. Shouldn't they have thought of this 5 years ago? Nothing like timeliness, I always say.

-- JackW (jpayne@webtv.com), September 29, 2000.


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