putin considers creation of gas opec

http://www.ft.com/cms/s/f4e756a4-b261-11db-a79f-0000779e2340.html

President Vladimir Putin said on Thursday Russia was interested in the idea of a "gas Opec" to co-ordinate supply activities and ensure energy security - but not as a price-fixing organisation.

Kremlin officials have previously dismissed suggestions Russia could form part of an international gas exporters' alliance. Despite Mr Putin's insistence that it would not be a cartel, his apparent openness to some sort of co-ordination with other suppliers may stoke European concerns about reliance on Russian energy.

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The FT reported last November that a confidential study by Nato economics experts had warned that Russia might be seeking to build a gas cartel including Algeria, Qatar, Libya, central Asian republics and perhaps Iran.

"A gas Opec is an interesting idea. We will think about it," Mr Putin told journalists during a three-and-a-half hour Kremlin press conference that has become an annual ritual. "We are not going to set up a cartel. But it would be correct to co-ordinate our activities with an eye to the solution of the main goal of unconditionally and securely supplying the main consumers of energy resources."

Separately, he insisted there would be no orchestrated transition to a chosen successor candidate when he stands down next year. The Russian people would make a "democratic choice".

"There will be no successors," Mr Putin said. "There will be candidates for the post of president of the Russian Federation. It is the authorities' duty to ensure democratic coverage of their electoral campaigns."

The president hinted he would indicate which candidate he favoured - though only after the electoral campaign had begun.

Dmitry Medvedev and Sergei Ivanov, both promoted to first deputy prime minister in late 2005, are seen as vying to be Mr Putin's favoured candidate. But speculation has been intensifying about how and when the Russian president would mark out his choice.

Ayatollah Ali Khamenei, Iran's supreme leader, was quoted this week as saying Russia and Iran could set up "an organisation of gas co-operation like Opec" since they together controlled half the world's gas reserves.

But a gas cartel that influences prices in the short term has been ruled out by Algeria and others as unachievable and undesirable. Nevertheless, longer-term co-operation between Russia and Algeria appears to be moving ahead. Sonatrach, Algeria's national energy company, is preparing to participate in four Russian gas exploration deals, a move that could help control the speed of investment by Europe's two main gas suppliers and therefore also eventually increase the price of gas.

Mr Putin hit back at suggestions that Russia was using energy as a weapon, accusing critics - mostly in the media - of distorting its policy of moving to market prices for oil and gas to former Soviet neighbours.

He insisted Russia had helped safeguard newly independent states' sovereignty after the USSR collapsed, but subsidies could not go on for ever.

"We must not subsidise the economies of other countries in large amounts, comparable with their budgets. No one else does that." he said.

He added that new pricing and tariff arrangements with transit countries such as Belarus and Ukraine were aimed "precisely at ensuring the interests of key consumers" in western Europe, for which Moscow should be thanked.