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G8 FMs call for stable energy supplies

Finance ministers of the world's wealthiest nations complained about high oil prices at talks in Russia on Saturday.

india Updated: Feb 11, 2006 16:56 IST

Finance ministers of the world's wealthiest nations complained about high oil prices at talks in Russia on Saturday but said they nonetheless believed economic growth would be good again this year.

"Overall global growth remains solid and is expected to continue in 2006," a draft communique from the ministers of the Group of Eight (G8) club of industrialised countries said. "Risks remain, including high and volatile energy prices."

The meeting in icy Moscow marked Russia's first turn as G8 president and focused primarily on concern over the cost and reliability of supplies of oil and gas.

It is one of the world's biggest suppliers but a recent row with Ukraine, in which it closed the gas taps, has triggered ill-ease among several countries of the G8 -- which comprises the United States, Japan, Canada, Germany, Italy, Britain and France.

"The market mechanism is vital to the effective functioning of the global energy system," said the draft communique, read to Reuters by an official at the meeting in a city centre hotel.

Other officials said that they were keen for Russia itself to allow greater foreign investment in its energy sector and loosen the grip of the monopoly supplier Gazprom.

The finance ministers kicked off their talks over breakfast with their opposite numbers from some of the rising stars of the world economy, China, India, Brazil and South Africa.

China's breakneck expansion rate, more than twice the pace of the world in general, has also made it the world's second largest consumer after the United States of oil.

Rising demand has doubled oil prices in the past two years but another major worry is securing reliable supplies of energy from regions often prone to instability.

The standoff with oil-rich Iran serves as a reminder of how vulnerable supply can be, as did the Russia-Ukraine spat over how much the latter paid for gas.

Russia has declared energy security a priority of its annual G8 presidency, but is being asked to prove it is serious after cutting gas exports to Ukraine and Western Europe at the start of 2006.

"Given the high level of oil prices we need to think about how to secure stable energy supply," Japanese Finance Minister Sadakazu Tanigaki said.

A U.S. official said the G8 was pushing to create a more stable world market for energy.

"We as finance ministers will continue to press for greater transparency, better quality of data, better understanding of how market mechanisms are working or not working and how we might address market failures," the US official said.

No quick fix

Officials said they expected little in the way of concrete developments to emerge from the Moscow meeting but said it was clear France and other European members of the G8 wanted Moscow to allow more foreign investment and loosen the monopoly of the Russian energy company, Gazprom.

That would involve Russia ratifying an international charter on the matter, something many people say will not happen soon.

Pressure could mount though, with another meeting scheduled for March among energy ministers.

Russia's number two oil official Sergei Oganesyan was quick to dismiss the idea of an end to Gazprom's monopoly before the G8 ministers even arrived in the Russian capital. "There is and there will continue to be a monopoly," he told Reuters.

Gazprom does not allow others to export gas to Europe or to even produce more than it is prepared to accept in trunk pipelines, all of which are under its control.

For Putin, the presidency of the G8 is a celebration of his country's transformation after the collapse of the Soviet Union, but the other finance ministers still do not consider Russia an equal, mindful that it went to the brink of financial ruin and debt default in 1998 even if it is rich in oil and gas.

First Published: Feb 11, 2006 16:56 IST