Russian energy chief advocates EU oil supply cut

02/05/2006

Russia should cut oil supplies to overfed Europe the chief of Russian pipeline monopolist Transneft has said. Less than a week after Russia's state gas monopoly Gazprom threatened to shift gas supplies from the EU to North America or China Transneft's president Semyon Vainshtok has now threatened Moscow could do the same with crude oil.

We have overfed Europe with crude. And every single economic manual says that excessive supplies depress prices Mr Vainshtok told the daily Nezavisimaya Gazeta on Monday (24 April) according to Reuters.

So far we cannot reduce supplies as all our exports are going to Europe. But as soon as we divert [flows] to China South Korea Australia Japan it will immediately take away crude from our European colleagues he said.

The Russian oil chief was referring to plans by Transneft to construct the Eastern Siberia-Pacific Ocean pipeline aimed at feeding booming Asia with Russian oil according to Russian media. Mr Vainshtok's comments are likely to increase worries in European capitals over Moscow's reliability as an energy supplier fuelled last week by Gazprom chief Alexei Miller.

Mr Miller said it was no accident that the state gas monopoly was looking at markets outside Europe following alleged attempts by European governments to frustrate Gazprom's activities on the European energy market. The comments were widely seen as a reaction to British resistance against a possible takeover by Gazprom of the main UK gas supplier Centrica. Gazprom's threat was characterised by the German conservative member of the European Parliament Elmar Brok as the announcement of a Cold War with new methods.

Meanwhile Gazprom has also expressed an interest in obtaining a majority share in a planned German energy plant near Greifswald. The move would enable Gazprom to sell gas from a planned direct pipeline between Russia and Germany directly to German customers Die Welt reports.

Washington has also signalled uneasiness with Moscow's energy power game. The Financial Times reports that US foreign secretary Condoleezza Rice is set to press the Greek government to reject Gazprom's participation in a new gas pipeline between Greece and Turkey. Ms Rice who will visit Athens on Tuesday wants to see both Greece and Turkey reduce their reliance on Russian gas supplies.

Washington's concern echoes that of the International Energy Agency (IEA) which has warned Europe against becoming too dependent on Russian energy. IEA chief economist Fatih Birol told Financial Times Deutschland last week that Europe must change its energy policy in order to avoid becoming too dependent on Russian gas.

Currently Gazprom provides about 30 percent of gas supplies for France Germany and Italy and over 90 percent to new EU member states in central and eastern Europe. Russia also supplies about one quarter of Europe's crude oil. The Norwegian foreign minister Jonas Gahr Store has suggested that increased extraction of oil and natural gas from the Barents Sea may provide Europe with its much needed energy. Norway has jurisdiction over one part of the Barents Sea.

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