Energy on minds as wealthy meet

MOSCOW - Concern over world energy supplies will dominate when finance ministers from the G8 wealthy nations meet this weekend for talks chaired for the first time by Russia - with the host country itself partly in the firing line.

Discussion of foreign exchange rates and economic imbalances such as the United States current account deficit are conspicuously absent at talks where Russia is being kept very much on the sidelines despite having the year-long presidency of the Group of Eight.

Officials said Russia, which was in financial ruins less than a decade ago but is now awash with oil cash and growing rapidly, also wanted to pay off some of its foreign debts and would raise that issue at the Moscow meeting.

President Vladimir Putin, who opens the gathering today, has made energy security a priority of Russia's turn at the helm, but the year began badly with a feud that halted Russian gas supplies to Ukraine and wider Europe.

Tension over what some regard as Russia's willingness to use its energy resources as a political weapon in the former Soviet Union region was still simmering ahead of the Moscow meeting.

"The Ukraine question will obviously be the backdrop but it is difficult to raise at the meeting as such," said an official from one of the other G8 countries, which are the US, Japan, Germany, Britain, France, Italy and Canada.

Separately, Canadian officials said the focus was also on greater investment in oil extraction and refining, to contain black bullion prices that have doubled in the last two years and are trading at more than US$60 ($89) a barrel.

Russia, invited to join the G8 in the 1990s to cement its transition from communism to democracy, hosts a summit of G8 leaders in July but remains largely an onlooker when finance ministers meet, reducing the scope of this weekend's meeting.

Several of the other G8 capitals, and above all Washington, are reluctant to admit Russia fully to the finance club when the country was in virtual economic meltdown and debt default as recently as 1998.

The tension over energy is another issue.

Russia is one of the big suppliers to a club of countries that is dependent on imports of oil and gas.

G8 officials said they wanted Russia to ratify international pacts that would allow more foreign investment in energy there and also permit rivals to put gas through its pipes alongside monopoly firm Gazprom.

But they held out little hope of Russia making any kind of concession during the ministers' meeting.

One of the big things Moscow will propose is that it buy back US$11 billion to US$12 billion in debt it owes mainly to G8 members, and it is saying this move could be used to finance Third World debt relief.

Officials in other G8 capitals said what counted more was the size of discount Russia sought from normal market rates of repayment.

Finance ministers will be briefed by representatives of the fastest-growing emerging nations: China, India, Brazil and South Africa.

- REUTERS