Oil and Gas News

Russian deputy advocates 'gas OPEC' in former Soviet Union

Nov 17, 2006, 17:08 GMT

Moscow - Amid NATO warnings of a Russian-led 'gas OPEC,' Russia's largest natural gas interest group says it is trying to unite the former Soviet Union's gas producers.

An alliance of the gas associations of Kazakhstan, Turkmenistan, Azerbaijan and other ex-Soviet states would be 'an absolutely sensible business idea,' Valery Yazev, head of the Russian Gas Society, said Friday in remarks carried by Interfax.

'I don't know if there was or wasn't a NATO report about how undesirable such an organization would be; I understand I am doing the right thing,' said Yazev, also the chairman of the energy committee of Russia's lower house of parliament, the Duma.

Many in Western Europe have voiced concern about energy security after Russia's natural gas monopoly, Gazprom, cut off supplies to Ukraine amid a pricing row at the frigid start of the year.

Many in Europe fear the gas giant, which meets one-quarter of the continent's needs, is a tool for Russian foreign policy.

Gazprom had increasingly been setting high prices for countries, such as Georgia, that are in Moscow's bad books.

Ukraine, which has seen something of a rapprochement in relations with Moscow after January's supply cut collapsed a pro-Western government, will pay half of what Georgia does in 2007.

But on Friday, company officials said they had insisted on 'market prices' with Belarus, an often-difficult Russian ally. Earlier this fall, Gazprom said a fair price would be 200 US dollars per 1,000 cubic metres of the fuel - close to what Georgia will pay.

Media reports circulated last week that NATO had expressed fears Russia would create a gas cartel analogous to the oil society OPEC, which largely determines on its own whim world oil output and prices.

Kremlin sources denied the reports at the time.

Arkady Dvorkovich, an economic adviser to Russian President Vladimir Putin, said Moscow had no such plans. But, he added: 'If all major gas producers are interested in reaching such an agreement, its creation is possible.'

Yazev, the Russian Gas Society head and Duma chair, said Friday he had advocated the so-called gas OPEC 'seven or eight years ago.'

From Russia's point of view, he said, there is every reason to unite the interests of gas-producing countries.

Such an organization would function on a nongovernmental level - 'social diplomacy' - Yazev added.

'Eurogas, which unites the (gas) associations of European states and companies, exists and nobody bats an eyelash,' Yazev said. 'But as soon as we talk about such an association in the former Soviet Union, everyone runs for their bayonets.'

Yazev did not mention major gas-producing countries like Algeria, which the NATO report speculated could be included in the cartel.