Energy is central focus at G-8 finance ministers’ meeting in Russia
MOSCOW – Finance ministers from the world’s richest nations focused on energy supplies and the effect of high oil prices on the global economy at a meeting Saturday hosted by energy giant Russia.Russia’s economy has been buoyed by high oil prices. But a recent gas dispute with Ukraine raised concerns about Moscow’s reliability as an energy supplier and threatened to overshadow the Group of Eight meeting.Despite the tensions, a blueprint for the St. Petersburg summit of the G-8 heads of state in July appeared to have been firmly put in place.In their final communique, ministers warned of the effect of “high and volatile” energy prices on the world economy but said they expected global growth to continue in 2006.They also warned of a potential threat to the world’s economy should bird flu become a global pandemic and called for more financial help for affected countries.”We are all concerned about the risks of rising energy prices and what they do to growth,” U.S. Treasury Secretary John Snow said at a news conference after the meetings.Russia made much of its position as the world’s second-biggest oil exporter after Saudi Arabia, touting pipeline projects and hydrocarbon wealth.”Decentralization of production and supplies to global markets will help … lower prices in the mid- to long term,” Russian Finance Minister Alexey Kudrin told reporters.Russia currently is building a gas pipeline directly to Germany under the Baltic Sea, while a crude oil pipeline to Asian markets is awaiting approval from regulators. Untapped reserves in the Barents Sea and Eastern Siberia offer rich sources of new supply.Kudrin also said the government was working toward giving independent gas producers equal access to the state-controlled pipeline network.France’s Thierry Breton made a list of the “uncertainties” facing the world energy market, including Russia’s gas price fight with Ukraine, supply fears over the nuclear standoff with Iran and Hamas’ victory in Palestinian elections.But there was no criticism of the G-8 host over the Ukrainian spat, which led to Russian gas supplies to parts of Europe being briefly cut off.Russia insists the fight was driven by a shift to market prices by state-controlled gas behemoth Gazprom. But observers have said Russia was using its energy muscle to pressure Ukraine’s Western-leaning government by insisting on an immediate increase to market prices.German Finance Minister Peer Steinbrueck, however, gave a vote of confidence to Russia and its reliability as an energy supplier, saying it was “much more differentiated and complex than has been presented by many media in western Europe.””I have no doubt about the reliability of Gazprom, or Russia in general, as a supplier of energy to western Europe,” he told German television.Russia’s Kudrin, who earlier described the talks as “stormy,” told reporters that discussions between ministers “are always quite tense.” He also said there had been tough negotiations on the so-called Doha round of trade talks for the World Trade Organization.”It was a serious, deep conversation, employing figures and analysis,” he said. “All developing countries spoke in favor of accelerating the process.”Despite Russia’s key role as an energy supplier, it has yet to be admitted as a full member of the WTO and has been largely kept out of discussions among the finance ministers on big issues such as exchange rates and the U.S. trade deficit – which hit an all-time high in 2005.The United States is one of the only countries Russia has yet to reach agreement with on WTO membership. Negotiations have stuck in particular over Moscow’s insistence that branches of foreign-owned banks not be allowed to operate in Russia.Commenting on Russia’s own bid, Snow said: “I think we’re in the home stretch.”Russia has been pushing for entry into the 149-member global trading body since 1994 and the lack of a trade agreement with the United States is a key obstacle.”I strongly hope that our negotiators will be able to succeed their talks on Russian WTO accession that would create even better conditions for the development of trade and economic ties,” Russian President Vladimir Putin said.With oil prices soaring in recent years, Russia has seen its coffers swell, and it now supplies about a quarter of Europe’s gas consumption.The ministers welcomed “Russia’s improved fiscal position,” which has prompted it to offer to pay down nearly all of its Soviet-era debt this year to the Paris Club of creditors. Russia’s suggestion that the foreign creditors use the money as part of aid to poor nations still was being discussed, however, Kudrin said.In an indirect reference to the record U.S. trade deficit, the ministers noted that more work needed to be done to right global trade imbalances “and promote the sustainable growth of the global economy.”At a Kremlin meeting with ministers, Putin also hinted at the question of the U.S. deficit by saying the world’s “fragile financial architecture has shown signs of instability.”Also at the G-8 meeting, Paul Wolfowitz, the World Bank president, said the bank would be ready to provide full debt forgiveness for its poorest borrowers by July 1.Last year, World Bank shareholders agreed to write off 100 percent of debts owed by 28 countries, as well as agreeing to replenish the World Bank’s trust fund for poor countries to make up the $14 billion cost.