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Last Updated: Friday, 23 June 2006, 17:17 GMT 18:17 UK
Energy lever boosts Russian power
By William Horsley
BBC European Affairs correspondent

Next month Russia will for the first time host the G8 summit of leading industrialised nations. It will be an occasion for Europe and the US to remind Russia not to use the energy weapon as a tool of foreign policy.

Baltic gas pipeline near Boksitogorsk, 300km (187.5 miles) east of St Petersburg
Russia has started work on the Baltic gas pipeline
In a joint statement after their Vienna summit this week US President George Bush and European Union leaders jointly listed their concerns about some recent developments in Russia.

First on that list was Russia's assertive energy policy; then Russia's alleged backsliding on issues like the rule of law, judicial independence and respect for human rights.

At the G8 summit in St Petersburg, President Vladimir Putin wants to exclude awkward questions about Russia's democratic standards. He has put energy security, as well as education and the fight against disease, on the agenda.

The US and EU want Russia to renounce any aggressive use of the "energy weapon" and commit itself to the values of the free market and transparency in its energy dealings.

Mr Putin has accused the West of double standards. He claims Russia has proved itself a reliable energy supplier for Europe over the past 50 years.

Gazprom logo
Gazprom wants to play a bigger role in Western energy markets
And now that Russia has emerged as the world's biggest source of natural gas and an energy superpower, he says it is normal to use those assets to advance its own national interests.

But Russia's recent actions suggest the West is being rebuffed, and that Russia is re-balancing east-west relations in its own favour.

  • The lower house of the Russian parliament, the Duma, recently voted to confirm the giant state-controlled company Gazprom's monopoly on all gas exports from Russia.

  • Mr Putin has hinted that Russia may divert gas deliveries away from Europe to the Far East unless European countries let Gazprom buy into Europe's own network of energy distribution.

  • Mr Putin has concluded long-term deals with favoured partners in Europe in return for privileged relationships - notably though the North European pipeline being built from Russia to Germany under the Baltic Sea, bypassing Poland and Belarus. The deal, which was negotiated in some secrecy with then German Chancellor Gerhard Schroeder, led to Polish complaints of "Russian blackmail". That charge was echoed in May by US Vice-President Dick Cheney.

  • The temporary deal agreed between Russia and Ukraine after their dispute last January, which briefly interrupted the flow of gas to many parts of Europe, is at risk of unravelling soon with knock-on effects again for Europe. European Commission President Jose Manuel Barroso has protested at the use of energy for "political coercion".

  • Gazprom, acting for the Russian government, is intent on consolidating its control of the gas pipeline network in Belarus. Belarus appears almost helpless, as it cannot pay the commercial prices for Russian gas that Moscow now demands. Contrary to Russian claims, experts say that Russia restricted the gas flow to Belarus in an earlier dispute two years ago, causing supply disruptions in Poland and further afield.

  • Mr Putin, in Hungary in February, offered special access to Russian gas in return for freedom to invest in local energy networks. Yury Fedorov, a senior analyst from the Institute for International Relations in Moscow, told the BBC then that Mr Putin's message to Europe was that it should not criticise "diminishing democracy" in Russia, but should "recognise Russia's sphere of influence", from Belarus to the Caucasus and Central Asia.

The Russian government has also sharpened its opposition to the possible future entry of Ukraine and Georgia into Nato. Russia's position as an energy superpower, willing to give or deny its favours at will, gives it extra leverage to dissuade the western alliance from encroaching further on territory of the former Soviet Union.

Russian co-operation is now vital, too, for the US and Europe in highly sensitive foreign policy goals, such as stopping the spread of nuclear weapons to Iran, and dealing with the Hamas-led government in the Palestinian territories.

Russia is paying off its international debts, both financial and political. Thanks to Mr Putin's single-minded policies and to high world energy prices, Russia is once again strong enough to try to dictate terms in its relations with the rest of the world.

Yet Andrei Illarionov, a former Kremlin adviser who fell out with Mr Putin's team, says Europe must stand up to Russia's new energy tsars by insisting on open and transparent business rules in Russia's energy sector. Otherwise, he says, the Europeans will find themselves at the mercy of the Russian state, and so face "a cold, dark future".

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