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Russian PM urges bigger market role in energy sector
AFP
May 28, 2002
Prime Minister Mikhail Kasyanov called for greater liberalisation of Russia's energy sector but stressed that state regulation would retain a key role even if the sector were fully to embrace market principles.
As he did so a senior Spanish minister, in Moscow to attend a Russia-EU summit where his country holds the presidency, warned that Russia's chances of obtaining market economy status depended largely on its performance in this regard.
"The present level of competition (in the energy sector) is not in keeping with what should be achieved in a market economy," Kasyanov told a cabinet meeting where he said he hoped to fix Russia's energy strategy up to 2020, news agencies reported.
"A great deal needs to be done in this respect," Kasyanov said.
Liberalisation of Russia's huge energy sector will be a key issue at a Russia-European Union summit Wednesday in Moscow, where Brussels will be pressing for the introduction of market forces and short-term delivery contracts, measures opposed by the major Russian suppliers such as gas giant Gazprom.
EU officials believe that substantial structural reforms are necessary if Russia and the former Soviet states bording the resource-rich Caspian Sea are fully to realise their huge energy potential.
Another sticking point is the massive subsidies that enable Russian authorities to keep energy costs to domestic consumers at artificially low levels.
Spanish Economy Minister Rodrigo Rato, who held talks with Russian Finance Minister Alexei Kudrin, said that "these parameters are among the fundamental issues that Russia absolutely must resolve if it is to receive market economy status."
Russia and the EU "must reach an agreement on this," he said, as quoted by the RIA Novosti news agency.
Among a flurry of meetings between Russian ministers and officials with EU envoys were talks between the EU Commissioner for Energy, Loyola de Palacio, and Gazprom president Alexei Miller, and between Trade Commissioner Pascal Lamy and Kudrin.
Kasyanov told his colleagues that despite the increasing application of energy-saving technologies, energy consumption was set to grow over the next 20 years.
"Clear and transparent mechanisms" for coordinating public interests with the interests of private enterprise are therefore needed, he said, as quoted by Interfax.
The strategy should include further efforts to promote competition on the domestic market but these should take into account the specific characteristics of Russia's regions, he noted.
The Russian government is also considering ways of replenishing mineral resources given that Russia's oil reserves slipped by 13 percent over the past 10 years.
The volume of geological prospection has fallen sharply, Kasyanov noted. Although the situation with natural gas reserves is better, surveying should be stepped up here too, he said.
"Structural transformations that have been started must be taken into account," Kasyanov said, though he stressed that state regulation would retain its key role.
The government aims to carry out a major overhaul of the fuel and energy sector by 2004 or 2005, the ITAR-TASS news agency said, quoting energy ministry sources.
The priority will be to increase competitiveness and provide companies with equal access to all resources in the fuel and energy complex, while also imposing strict conditions for environmental protection, it quoted the sources as saying.
The energy complex currently provides for around 20 percent of Russia's gross domestic product, yielding more than 50 percent of federal revenue and 45 percent of Russia's hard currency income, ITAR-TASS said.
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