Date:03/02/2007 URL: http://www.thehindu.com/2007/02/03/stories/2007020302771100.htm

Opinion - News Analysis

Putin for `gas OPEC'

Vladimir Radyuhin

Russian President to discuss proposal with Saudi Arabia and Qatar next week.

THE IDEA of setting up a natural gas equivalent of the oil producers' cartel, the Organisation of the Petroleum Exporting Countries (OPEC), gained new momentum when President Vladimir Putin threw his weight behind it last week. "A gas OPEC is an interesting idea. We will think about it," Mr. Putin said at his annual news conference on Thursday when asked to comment on Iran's proposal to Russia to establish an organisation of gas-exporting countries along the lines of OPEC.

This is the first time the Russian leader has thrown his weight behind a natural gas OPEC, first articulated by Iran's President Mahmoud Ahmadinejad at the 2006 Shanghai Cooperation Organisation (SCO) summit.

At that time Mr. Putin played down the idea, saying Russia and Iran were only discussing a joint venture for the development of gas fields in both countries, which "is no gas version of OPEC."

Last week, Iran's Supreme Leader Ayatollah Ali Khamenei told the visiting Russian Security Council Secretary, Igor Ivanov, that the two countries could set up "an organisation of gas co-operation like OPEC" since they together controlled half the world's gas reserves. This time Mr. Putin not only welcomed the proposal but said he would discuss it during his visits to Saudi Arabia and Qatar next week.

Mr. Putin denied the proposed gas OPEC would be a price-fixing cartel. "We are not going to set up a cartel," he said. "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."

Moscow has so far shunned the idea of a gas OPEC to avoid creating problems in its tense energy talks with the European Union. But the talks have stumbled over Europe's demand that Russia ratify the Energy Charter, which would give Western companies free access to Russian energy resources and pipelines. Russia has flatly refused, and, in turn, is demanding access to the retail gas market of Europe. Poland and some other EU members have called for establishing an "energy NATO" to stop Russia flexing its energy muscles.

By publicly backing the idea of a gas OPEC, Mr. Putin appears to be telling the Europeans that unless they are more forthcoming on the energy issue Russia would consider other options. The idea of a gas OPEC is also too attractive in its own right for the gas-producing countries to ignore.

Russia has the world's largest natural gas reserves, estimated at 30 per cent. If Russia's reserves are combined with those of the two other biggest gas holders — Iran and Qatar — the figure reaches nearly 60 per cent.

In contrast to Europe and the U.S., India could benefit from the establishment of a gas OPEC. A priority task for the gas cartel would be to map out gas exports routes so as to reduce competition among its members. This would facilitate the construction of the Iran-Pakistan-India (IPI) gas pipeline, a key project that would help Russia avoid clashing with Iran on the European gas market by sending Iranian gas to Asia.

During the SCO Shanghai summit, Mr. Putin confirmed that Tehran was keen to involve Russia's Gazprom gas monopoly in the IPI pipeline, and said Russia was also keen to join. "Gazprom is willing to provide financial and technological resources to help build the pipeline from Iran to Pakistan and India," he said. "This project is financially sound and perfectly feasible."