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Energy Issues Top Russia-EU Talks

  • Lisa McAdams

Russia's foreign minister is meeting in Brussels with European Union officials ahead of a Russia-EU summit later this month. There is Western concern that Russia is using its massive energy riches as political blackmail against former Soviet Republics like Georgia is expected to feature high on the agenda.

On the eve of the meeting, Russia's state-run gas monopoly, Gazprom, announced it plans to more than double the price it asks Georgia to pay for gas beginning in January.

The announcement brings back painful memories of last winter's gas dispute with Ukraine, when Gazprom briefly halted the flow of gas to Kyiv in a bid to exact higher prices. That disruption halted supplies across much of Europe, and raised alarm bells in Western capitals over Russia's energy policy.

Chief Strategist Chris Weafer of Moscow's Alfa Bank says he expects Russia will continue to play the energy card with Europe.

"They are pushing this broader economic/industrial agenda, which means that they want access to foreign markets for Russian companies," he said. "They want Russian companies to be able to buy equity stakes in international companies across all industries. Europe has actually been resistant to that up to now. And, I think, Russia is holding up this energy card as a sword of Damocles over Europe, to try and force this issue."

Weafer says Europe has demands of its own. Namely, he says, Europe wants Russia to agree to invest more in energy development, so that Russia can produce and export more energy to Europe.

In Brussels, Finland's foreign minister, Erkki Tuomioja, and EU foreign policy chief Javier Solana are hoping for more positive news from Russian Foreign Minister Sergei Lavrov on the situation with Georgia.

Tbilisi is struggling under a full travel and trade blockade imposed by Moscow, after Georgia expelled four Russian military officers for alleged spying in September. But most analysts agree progress seems unlikely, given that the foreign ministers of Georgia and Russia failed to reach any breakthrough earlier this week, during the first high-level contacts in Moscow since the crisis began.

Georgia's foreign minister was quoted as saying that the price Georgia ultimately pays Gazprom for its gas will be the price it pays for aligning itself with the West.

Russian President Vladimir Putin has rejected criticism that Russia is playing politics with oil in Georgia, or elsewhere.

Strategist Weafer is skeptical.

"Obviously, the timing is dictated by political considerations. So, yes, long-term, Gazprom will sell gas at a higher price. But how quickly it does that, and in what steps to what countries, that will be based on political considerations, rather than economic considerations," said Weafer.

Meanwhile, Gazprom, which has to import gas from neighboring republics to meet its supply commitments, faces price hikes of its own. Uzbekistan and Turkmenistan both recently said they would raise their gas export prices to Russia from $55 to $100 as of January.