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Putin faces energy shootout

Worried that the lights could go out, European Union chiefs will press President Vladimir Putin on Thursday to agree new rules on future Russian oil and gas supplies, pricing and investment.

But Moscow is in no mood to haggle. It has already rejected a proposed international energy charter. And European governments lack a united front. As a result, the meeting, in Sochi on the Black Sea, is unlikely to bring relief to benighted European consumers and businesses.

Energy-fuelled tensions between Russia and the West may instead come to a head at the Group of Eight (G8) summit in St Petersburg on July 15. Traditionally a staid event, this is shaping up as the diplomatic equivalent of the shootout at the OK Corral — or a wildcatter’s oil-well brawl. After the United States Vice-President Dick Cheney’s recent anti-Moscow broadside, there is loose talk of a new cold war.

US President George Bush has rejected pressure at home to boycott the summit altogether. But he is expected to voice displeasure at Russia’s perceived lurch towards authoritarianism and its intimidation of smaller neighbours. For his part, an increasingly bullish Putin may point to Washington’s need for Russia’s help with Iran and other international issues and reject ”Comrade Wolf’s” interference.

The Kremlin’s overflowing energy coffers are the key to this increased assertiveness. Foreign-exchange reserves exceeding $230-billion, new ballistic missiles and closer ties with China mean that Russia feels it can look Washington in the eye again. ”Russia today is slowly growing into newly found statehood,” said Alex Norman in the Power and Interest newsletter. ”There is no doubt that the Kremlin sees itself as a rising power.”

Putin’s aide Igor Shuvalov insists Moscow, not the US or Europe, will set the G8’s agenda. As for the EU’s energy worries, Shuvalov told Nezavisimaya Gazeta this week: ”We are prepared to provide Europe with oil and gas on a long-term basis and we are taking on the role of the leader … We will continue our expansion, whether our European partners like it or not.”

Energy dependence on Russia affects Europe more directly than the US, hence a potential future divergence in the strategies to counter it. And as relations with Washington deteriorate, Moscow does not want ongoing rows with the EU, too. But last winter’s temporary cut-off of Ukraine’s gas supplies by Russia’s Gazprom jolted EU leaders, raising concerns, particularly in Eastern Europe, that they could face similar treatment. Countries such as Germany have cut bilateral deals. Others, such as Britain, are talking up nuclear alternatives.

Oleh Rybachuk, chief of staff to Ukraine’s president, told the Policy Exchange think tank this week that his country’s experience was a ”pilot project for European politicians to realise the danger they are in”. He said Moscow damaged its reputation and will not make the same mistake again.

But concern grew this week that Ukraine could soon face further steep Russian gas-price rises. Kiev has asked the EU to defend its interests at the G8 summit. Andrei Illarionov, a former Kremlin adviser, said more than oil and gas is at stake. Russia has moved from being ”partially free” to ”un-free” under Putin. The rise of privately run, state-owned monopolies such as Gazprom challenges the West’s belief in free markets and free societies.

”What we see now is a great battle unfolding,” he said. ”It is about the fundamental institutions that define Western civilisation — the market economy, liberal democracy, the rule of law — and the moral standards and values underlying these institutions.”

Europe should stand up to Russia’s ”new energy tsars” in St Petersburg, he said. But he warned that the West might falter, anxious that the plug would be pulled. ”Without this leadership, Europe’s future certainly will be cold and dark.”

To mangle Marx, European consumers have nothing to lose but their mains. — Guardian Unlimited Â

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