Moscow's reliability as Europe's main energy supplier was questioned in early January when a dispute between Russia and neighboring Belarus led to a three-day interruption of oil deliveries to Poland, Germany and other European consumers.
At the time, Minsk imposed a transit fee on Europe-bound crude exports in retaliation for a hike in the natural gas price Moscow charged Belarus. Moscow accused Minsk of illegally tapping the transit pipeline, and shut down oil deliveries until an agreement was reached in emergency negotiations.
Speaking at a Russian-German strategic partnership conference, Igor Shuvalov commented on Europe's fears that Russia might use its oil and gas supplies as a political weapon.
"We [Russia] announced our plans to shift to European price levels for gas deliveries by 2011 long ago, and suggested that Belarus prepare for a price rise. However, nobody mentioned a transit duty for oil supplied through the Druzhba pipeline at the time, which violated international trade norms," the official said.
Russia had complained of huge losses inflicted on its budget from crude deliveries to its Western neighbor. Belarus would refine Russian crude oil and re-export it to third countries at world prices, while paying no taxes to the Russian budget in the process.
As of 2007, Russia canceled a preferential price for natural gas supplies to Belarus, doubling it to $100 per 1,000 cubic meters, in line with its drive to gradually bring gas prices for former Soviet satellites closer to European levels.
Calling Belarus's move a blackmail attempt, he said Russia's prioritizing energy security issues on the agenda of its presidency over the Group of Eight Industrialized Nations was not in vain.
"We have called for the complete transparency of countries producing, transporting and buying energy resources. Russia had to make concessions to resolve the conflict with Belarus. Although we will continue subsiding the Belarusian economy for some time, we have learned our lesson in that situation," Shuvalov said .
Russian President Vladimir Putin said earlier this week that Russia's energy subsidies for Belarus would reach $5.8 billion in 2007, and that Belarus enjoys Europe's lowest energy prices.
Citing Finance Ministry data, Putin said Russian support accounted for about 41% of Belarus's budget, which stands at around $14 billion in 2007. He said that is the price of an orderly transition to free market relations between allies, and a necessary support for a state Russia is trying to forge a union with.
In order to avoid energy supply interruptions in the future, it is necessary to develop additional pipeline systems, Shuvalov said. He added that the Nord Stream project, set to run directly from Russia to Germany across the Baltic seafloor, would be considerably expanded so that "transit countries could not blackmail us and dictate their terms."
Saying that Germany, as an EU and G8 leader, had every opportunity to elaborate a common European energy security policy, Shuvalov dismissed the possibility that Russia would ratify the Energy Charter Treaty.
Russia has been unwilling to ratify the charter, which was drawn up as a cooperation mechanism between Western and Eastern Europe on energy issues and signed at The Hague in 1991, as the document would force it to give foreign investors free access to the country's oil and gas deposits and export pipelines.
Shuvalov said Russia could guarantee uninterrupted supplies in a different form. "We have certain differences on transit, but we are ready for talks," he said.
German ex-Chancellor Gerhard Schroeder, who represented his country at the meeting, said Europe's dependence on Russian energy supplies would only increase given rising energy consumption and that the EU must secure sustained deliveries for itself.
He warned that Russia could turn to alternative energy markets in Asia, particularly energy-hungry China, Japan and India.
Schroeder called for the development of a common European pipeline network, including the Nord Stream project, which is expected to begin operating in 2010 and was designed to minimize transit risks associated with Russian gas supplies to Western Europe, mainly via Ukraine and Belarus.
"Even if transit countries are stable, the existing pipelines will soon be unable to pump all of the oil the EU consumes," he said.
