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Monday, April 21, 2008

Russia Takes a Charter to Iran

Apr. 21, 2008 - Kommersant by Natalia Grib, Andrey Odinets –  Kommersant has learned that, during a session of the Gas Exporting Countries Forum in Tehran on April 28, Russia will present a draft charter for that organization, which it has long dreamed of turning into a “gas OPEC.” Moscow's formulation of the tasks and goals of the GECF is softer than Iran's proposal, which was similar to the charter of OPEC. The organization is to become an international platform for the development of a formula for the price of gas and discussion of routes for new pipelines. Experts say it will be hard for the potential participants in the gas OPEC to agree among themselves. That means that the June forum in Moscow may not be a success.
Russian-Style Cartel
A source in the Russian government told Kommersant that a draft charter of the GECF was sent to the appropriate agencies of the 15 member states late last week. According to the source, the document was authored by the Ministry of Industry and Energy and Gazprom at the end of last year and spent three months being conciliated in the ministries. A Gazprom spokesman confirmed on Friday that “A draft charter is being discussed. It is to be considered at the next ministerial session of the GECF.” The charter is the first in the process started last autumn of turning the GECF from an amorphous entity into a powerful gas suppliers' lobby along the lines of OPEC. According to information obtained by Kommersant, the draft charter will be presented by Deputy Minister of Industry and Energy Anatoly Yanovsky at a high-level GECF committee session in Tehran on April 28. Yanovsky himself declined to comment. Another Kommersant informant commented that the nature of its developers shaped the nature of the document, which proposes the necessity of creating an international platform for development of a universal formula for the price of gas, the use of spot deliveries with the goal compensating for shortages of volume in the course of fulfilling long-term contracts, determination of the expediency of the construction of new gas pipelines taking account of the forecast risk.” The GECF was first held in Tehran in 2001. He does not have a charter, exact membership system or permanent representation in any country. Algeria, Bolivia, Brunei, Egypt, Equatorial Guinea, Indonesia, Iran, Libya, Malaysia, Nigeria, Oman, Qatar, Russia, Trinidad and Tobago, the United Arab Emirates and Venezuela continually take part in GECF sessions, and Turkmenistan has participated in some. Norway is considered an observer. The official goal of the organization is the development of mutual understanding between producers and consumers and governments and industrial sectors connected with energy and the creation of a stable and transparent fuel market. At the last forum, in Doha, the GECF member states agreed to form a committee on a high level that would meet every two months to discuss gas trade issues. It was also decided that the next forum would meet in Moscow in 2008. A Gazprom spokesman explained that details on the platform for dialog are still ”in the discussion stage.” Apparently, Moscow is expecting members of the transformed GECF to coordinate gas prices and agree on the routes of new gas pipelines. Gazprom and the Ministry of Industry and Energy deny that there will be nay analogy between GECF and OPEC, however. “We do not need a cartel agreement,” the source claimed.
Moderation Moscow-Style
Apparently, Moscow's current initiative is a response to a proposal for the future of the GECF made by Iran at the end of last year. Sources in the Russian government and Gazprom told Kommersant that the Iranian draft charter was largely copied from that of OPEC. The document proposed by Tehran was examined by the Russian ministries, but many of them gave it a negative assessment. The Russian Foreign Ministry was especially critical of it. Russian diplomats pointed out that support of the initiative would have a number of negative political consequences. The Foreign Ministry's was correct in its conclusions. In the West, conversations over the creation of a “gas OPEC” stir up strong reactions. In April of last year, a week before the GECF session in Doha, the deputy chairman of the U.S. House of Representatives Foreign Affairs Committee Ileana Ros-Lehtinen wrote to Secretary of State Condoleezza Rice vigorously demanding that she “make clear to all concerned that any movement to establish yet another menace to the world's energy supplies will have sharply negative consequences for all of those involved.” Ros-Lehtinen's call was supported by many in Congress and official spokesmen of the State Department and White House made a number of strongly-worded statements about a “gas OPEC.” The European Union was no less categorical. Not wanting to anger its partners needlessly, Russia has decided to tone down the rhetoric and get rid of the unwanted analogy between the future “gas OPEC” and the oil cartel. At the same time, Moscow has begun a project that could be an effective supplement to GECF, the International Alliance of Nongovernmental Natural Gas Organizations. That name was first heard of at the end of 2006, from the Russian Natural Gas Society, the main lobbyist for Gazprom, headed by State Duma member Valery Yazev. The IANNGO, in the conception of its organizers, would “create condition for the just distribution of income from the export of gas between producers and countries that transport gas, and form common investment sources for the development of the gas industry.” The main difference between IANNGO and GECF is that the former will unite “nongovernmental gas organizations and leading gas companies of the countries producing and transporting natural gas,” while the latter is an intergovernmental structure. The IANNGO project has been developing rapidly in recent years. At the beginning of April, the charter of the organization was presented to the parliamentary session of the Eurasian Economic Community. Belarus already supports the Russian initiative, which is sufficient to register it. Kazakhstan is waiting and Uzbekistan is considering it. “During the GECF in Moscow this June, we plan to present the IANNGO project as a platform for the settlement of problems among the gas business, consumers and the bodies of authority,” Russian Natural Gas Society vice president Oleg Zhilin told Kommersant. “We are frequently asked whether such states as Algeria, Qatar, Libya, Iran and Venezuela can become members of IANNGO. The answer is unambiguous. They can. It is unimportant how developed their democratic institutions are.”
Opposition Libyan-Style
Kommersant sources in government agencies were unwilling to predict which of the two competing draft GECF charters would be approved at the June forum, if they cannot be conciliated. There are abundant signs that the members of that organization have varying interests and differing expectations of it. For example, last week, Libyan leader Muammar Gaddafi stated at a lunch honoring Russian President Vladimir Putin that Tripoli supports “the idea of creating an organization of gas producing and exporting countries on the model of OPEC.” Gaddafi also stated what he expected from the new organization. Its members “should help countries suffering from soaring oil prices, especially African countries.” The likelihood of creating a natural gas analog to OPEC is viewed skeptically by experts. Vladimir Milov, president of the Institute for Energy Policy, explains that, in the next ten years, producers and consumers of natural gas will be linked by direct pipelines that, as a rule, will not intersect. “Qatar is the leading supplier to the United States and Great Britain, and Algeria to Spain and Italy. They cannot substitute each other's deliveries,” Milov said. Moreover, according to Milov, competition is mounting for transit routes. “As soon as Russia announced South Stream, Iran said it was ready to become the resource base for Nabucco and began making bilateral contracts for gas delivery to the EU on the Transadriatic Gas Pipeline from Turkey to Greece and, eventually, to Italy,” Milov noted. “The competitors cannot seriously be expected to conciliate routes between themselves.” Milov thinks such associations are only “political dances and PR” without a united Political base. “Russia and Iran are not leaders within the gas forum. Qatar is friendly to the U.S. and will not make intrigues with Russian or Iranian sponsorship,” he said. “In addition, Tehran, which preaches the Shia religion, is not trusted by the majority of Sunni gas exporting states in the Middle East. Russia, as a non-Muslim country, also has little trust in the region. Unlike them, Sunni Saudi Arabia is the political leader of the Middle East.” Mikhail Korchemkin, director of the U.S. firm East European Gas Analysis thinks that the formation of a “gas OPEC” and cartel price control would push EU consumers to refuse natural gas and turn to alternative fuels. “Every announcement of reduced deliveries of gas to Ukraine or Belarus drive up demand for heating oil sharply in Europe,” he explained. “I hope that the gas OPEC' will cause revolutionary changes in new sources of energy and the economy of energy usage.” Korchemkin thinks that, in that case, natural gas will be left as only a raw material for petrochemistry and fertilizer, and fall in price, as coal did between the two world wars.

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