G8 gets Russia to back Energy Charter principles

ST PETERSBURG, Russia, July 16 (Reuters) The Group of Eight won a pledge from Russia today to open its energy sector to foreign investment although Moscow refused to commit to ratifying the Energy Charter, an international rulebook.

''We support the principles of the Energy Charter and the efforts of participating countries to improve international energy cooperation,'' the G8 group of industrial nations said in a statement on energy security.

The European Union has pressed Russia, which supplies a quarter of its gas, to ratify the Charter -- a step which would require Russia to break the export monopoly of state-controlled gas giant Gazprom.

President Vladimir Putin has resisted that pressure and his officials have dismissed the Charter as outdated and ineffective.

But EU officials see his backing of wide energy security principles as a step in the right direction.

It took a jab from US Vice President Dick Cheney, who in May accused Moscow of using energy as a tool of ''intimidation and blackmail'' for Russia to soften its position on the Charter.

''The formula that was adopted ... takes note of the efforts by energy charter participations to improve international energy cooperation. Period. So no ratification of the energy charter,'' Russian G8 negotiator Andrei Kondakov told Reuters.

''We have a very good concession by the Russian side.'' The EU pushed the Charter, whose principles include backing for stable legal frameworks and market transparency, after Russia shocked the continent in January by cutting gas supplies to Europe in a pricing dispute with neighbouring Ukraine.

Russia has rowed back on its hostility to the Charter, but before going further Putin wants Russia to win promises that Gazprom will be able to gain greater ''security of demand'' by acquiring distribution assets in Europe.

Gazprom has its eyes on Centrica Britain's largest gas distributor, and has already embarked on deep cooperation with German utilities, including building a 5 billion dollars subsea export pipeline across the Baltic.

Ahead of the G8 summit, Germany's E.ON signed a deal with Gazprom to take a one-quarter stake in the Yuzhno Russkoye gas field, whose production will be pumped through the North European Gas Pipeline.

Although Russia has not ratified the Charter, a signature makes it binding unless it cuts across national laws. Russia is rushing to protect Gazprom by enshrining its monopoly in law.

LAUNCHPAD Experts say Russia needs massive investment in its energy infrastructure to keep its promises to supply oil and gas to the rest of the world in the future. European companies are also keen to have more access to Russian pipelines.

Moscow, however, wants Russian firms to be able to expand in Europe's distribution market and has sought assurances that demand for its vast energy resources will stay strong.

All sides agreed that rules were the best way to meet those goals. The G8 statement backed ''transparent, equitable and stable and effective legal and regulatory frameworks, including the obligation to uphold contracts, to generate sufficient, sustainable international investments upstream and downstream.'' The EU, which is becoming more reliant on gas imports, sees the G8 pact as a launchpad for more legally-binding agreements.

''Given the situation that we are in, we are very happy with the text as it is,'' an EU official said.

''The real question is whether the practice and the implementation will be according to the text as such.'' REUTERS PR PM1844