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French Merger Creates One of World's Biggest Energy Companies

France has announced the creation of one of the world's biggest energy companies. Analysts say the controversial merger between state-owned Gaz de France, and the private utility Suez will help calm concerns over Russia's dominance of the energy market. Anita Elash reports for VOA from Paris.

Negotiations between GDF and Suez started 18 months ago, and have been difficult from the beginning. The two sides have been hung up because of legal and financial disputes, and public protest over the potential privatization of the state-owned utility.

But last week, French President Nicolas Sarkozy starting putting pressure on both sides to reach a compromise.

The deal will create a new company, GDF Suez, with an estimated value of $123 billion. It will be the fourth-largest energy distributor in the world.

The merger is expected to be completed in early 2008. As part of the arrangement, Suez must sell off the large water and waste operations it runs.

The French government, which owns about 80 percent of GDF, agreed to reduce its share to 35 percent.

Russia's Gazprom is currently the world's largest energy distributor. It largely controls gas supplies in Eastern and Central Europe and is a dominant player in several Western European countries. This deal will provide an alternative to Gazprom.

Speaking on French public television, French economist Elie Cohen said the merger should ease concerns that Europe has grown too dependent on Russian energy supplies.

Cohen says the merger means the new company will have a critical mass to buy gas. It also means they can stock gas and transport it. So from the point of view of energy security, he says, it is very important.

Critics say the deal is protectionist, since it was originally designed to counter efforts by Italy to buy Suez. Critics also argue that gas prices will eventually go up.