Fears grow over Russia undermining EU energy strategy.

Italy has sounded the alarm over Russia's recent energy deal with Algeria, amid fears that the Kremlin is undermining the EU's strategy of seeking less energy dependency on Moscow.

Russia's state-owned energy firms Gazprom and Lukoil in August announced they would clinch a co-operation deal with Algeria's state energy firm Sonatrach, in a move which directly challenges EU plans to boost gas imports from Algeria in order to decrease dependency on Russian supplies.

German daily Handelsblatt reported on Friday (22 September) that Italian foreign minister Massimo d'Alema raised Rome's concerns about the issue in a letter to the EU's foreign policy chief, Javier Solana.

Mr D'Alema writes that "On the one hand they [Gazprom and Sonatrach] supply the largest part of Europe's gas needs, while on the other hand they are inextricably linked with their governments and thus they contribute to the realisation of geopolitical strategies."

The letter echoes concerns in the European Commission, with energy commissioner Andris Piebalgs saying back in August that "definitely we are worried about it."

Admitting that he still had insufficient information on the Russian-Algerian deal at the time, the commissioner stated however that "you can't exclude that parts of the deal could form some kind of cartel."

The Kremlin tightens its grip

The commission together with Mr Solana made clear in a paper published in June that the EU should seek less energy dependency on Moscow - which supplies around a quarter of Europe's gas and oil – following a dramatic Russian gas supply cut in January.

Algeria was earmarked in the paper as one alternative supplier to Russia, with one EU official saying at the time "If we manage to double gas imports from Algeria from 10 percent now to 20 percent in the future, the amount would be comparable to that of Russia."

But the Kremlin has now taken its own stake in Algerian energy production, and is also tightening its grip in another region which Brussels sees as a key alternative to Russian supplies – the South Caucasus and central Asia.

An energy expert quoted by FT Deutschland warned this week that "If the EU does not agree on a coherent external energy policy, central Asia will soon not be available as a supplier of gas," referring to Russian efforts to tie central Asian states to Moscow with raw materials contracts.

The EU's June energy paper had described the development of energy corridors to the Caspian region and Central Asia directly to the EU as "vital," with officials highlighting the "enormous" oil and gas reserves in Azerbaijan, Turkmenistan and Kazakhstan, which could reach the EU via Turkey bypassing Russia.

EU energy dependency up

Meanwhile, fresh figures by Eurostat, the EU's statistical office, revealed on Thursday that the EU's dependence on energy imports is increasing.

The union's dependency on energy supplies from abroad rose from 54 percent in 2004 to 56 percent in 2005.

At the same time, the EU's own energy production fell in all types of energy, with natural gas production dropping by 5.8 percent.

[Source: Euobserver, Brussels, 22Sep06]

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