How to Engage in Uncivilised Robbery

Russian Prime Minister Vladimir Putin on Friday criticised European Union laws aimed at liberalising the continent's energy market, saying they hinder investment and amount to uncivilised 'robbery.'

Putin, in Berlin for talks with Chancellor Angela Merkel, demanded the EU consult Moscow when drafting such important legislation, which he said threatened key gas pipelines backed by Russian state-controlled gas giant, Gazprom.

'What is this? What is this robbery?' Putin said in a speech to German investors, referring to the legislation which he said was damaging investments in major pipelines by forcing a separation of gas supply and transport assets.

'The investors of course counted on getting the right to use this infrastructure to pump their own gas. It is their gas, their investment, but then this Third Energy Package is accepted ... and they deny them the right to use their own property.'

The EU agreed in March 2009 to liberalise energy markets by splitting giant utilities, ensuring that small gas suppliers can get unhindered access to European infrastructure and compete on an equal footing with the dominant players.

The plan included a so-called 'Gazprom Clause' designed to prevent companies from outside the bloc from buying up strategic distribution networks without approval by governments.

Echoing criticism from Gazprom, which supplies a quarter of European gas, Putin said the EU legislation undermines vast Russian and German investments in pipelines to Europe.

Gazprom has a stake in Ostsee-Pipeline-Anbindungs-Leitung (OPAL), a pipeline linking the Nord Stream pipeline to Eastern Europe which should go onstream in 2011 and become the largest gas line in Europe.

Gazprom and Wintershall are also planning the North European gas pipeline (NEL) to transport Nord Stream gas from the German coast to Lower Saxony. It should come on stream in 2011.

Merkel said her country also disagreed with the European Commission on the need to split ownership of different functions within utilities, such as gas exploitation and delivery.

'Germany is not a fan of this philosophy,' she told a joint news conference with Putin, adding that her country intended to 'show the maximum flexibility' regarding energy suppliers.

RUSSIAN FIREWOOD?

The European Commission declined to comment directly on Putin's speech, but energy spokeswoman Marlene Holzner said the 'third energy package,' as the disputed legislation is known, 'will lead to open and integrated markets, which is good for competition and good for security of supply.'

Putin said the EU laws were already creating problems with pipelines that are to link into a trunk pipe being built across the Baltic Sea to Germany and with the gas distribution network in Lithuania, where Gazprom and E.ON Ruhrgas have warned of supply disruptions in a row over the EU regulations.

Putin said if Russia had to split pipeline ownership, 'each company will want to make a little bit of money and the final product for consumers in Germany will be more expensive.'

Such criticism overshadowed his visit to Germany, where he discussed E.ON's plans to sell a $4.5 billion Gazprom stake to state-owned bank VEB whose board he chairs.

Ahead of Putin's visit, Merkel on Thursday lambasted Russia's protectionist trade measures which she said were hurting German exports.

During Putin's presidency, Russia limited foreign investment in strategic sectors, giving state-controlled firms like Gazprom and Rosneft priority in its vast oil and gas sector.

European leaders want to reduce energy reliance on Russia, the world's biggest energy producer which Gazprom forecasts will raise its share of the European gas market over coming decades.

Putin quipped that if Europeans did not want gas or nuclear energy, they would still have to rely on Russia for firewood to heat their houses.

'I don't understand; how will you heat your houses? You do not want gas, you do not want to develop nuclear energy. Where will you get your heat from then? From firewood?'

'But even for firewood you will need to go to Siberia, you do not even have wood,' said Putin.

He mixed this criticism with a proposal for what amounts to an alliance with the European Union, saying it was essential for the survival of Russian and European civilisation.

Putin said that Russia and the EU could one day even have a joint currency zone and that Russia was looking at ideas for increasing the role of the euro in energy trading.

Merkel said she hoped Russia could join the World Trade Organisation in 2011 and added that while currency union between Russia and the EU had to be a long way off, 'naturally economic interrelations and currency cooperation go hand in hand.'

Source: Reuters