Friday, January 25, 2008

Russian Energy Deals Scare Europe

Russia expanded its growing European energy empire Friday, signing two more deals in a drive that is raising fears Moscow could use its vast oil and gas resources to meddle in the affairs of its neighbors.

Russia already supplies a quarter of Europe's natural gas and oil needs, and some Western leaders worry the growing dependence is giving the Kremlin a powerful geopolitical weapon.

Announcing the signing of two agreements with Serbia, Russian officials said the deal would make the poor Balkan nation an important hub for the distribution of Russian gas.

Moscow has been rushing to build or acquire European pipelines, storage facilities, ports and energy companies. But Russian government and corporate officials say the expansion is strictly a commercial effort that benefits both sides and ensures Europe gets the energy it needs.

"This network will be long-lasting, reliable, highly efficient, and what is very important, help boost energy supplies to Serbia and the entire European continent," Russian President Vladimir Putin said after the deals were signed.

Skeptics in Washington and some European capitals say Russia has already used its energy clout as a coercive tool of diplomacy. The U.S. has led an effort to limit its inroads — in part by planning new energy pipelines that would bypass Russian territory.

But there are doubts the alternative pipelines will ever be built, and many analysts say the European Union's quest for energy independence has fizzled.

"I think you can now say that Russia has either won the war or is very close to winning the war" over gas supplies, said Chris Weafer, chief strategist at UralSib, a Russian investment bank. "Because the EU, which sought non-Russian import routes and non-Russian gas supplies, has failed to achieve anything."

He said fast action by Russia to increase its energy deals has made it difficult for Western countries to organize the huge financial investment needed for rival pipelines.

"The Kremlin moved much more quickly and much more decisively," Weafer said.

Doug covers this in detail more on A Fistful of Euros and so does Randy.

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