WORLD / Europe

G-8 warn of rising energy prices
Updated: 2006-06-10 16:35

Finance ministers from the Group of Eight leading industrialized nations said Saturday in a draft communique that global growth is strong, but warned of dangers posed by high energy prices and economic imbalances.

Russia's Finance Minister Alexei Kudrin, right, and World Bank chief Paul Wolfowitz seen at a joint news conference in St. Petersburg, Russia, Friday June 9, 2006. Russia on Friday preceded a meeting of the Group of Eight finance ministers by declaring a plan to write off about US$700 million (553 million euros) in debt owed by the poorest countries, a move reflecting its oil-propelled wealth and a desire to jockey for an equal position with the world's top industrialized nations. [AP]
"Global growth remains strong and is gradually becoming more broadly based," said the ministers, who met in St. Petersburg in the run-up to next month's summit of G-8 leaders. "However, downside risks from high and volatile energy prices and widening global imbalances remain."

The ministers called for promoting greater transparency and reliability in energy market data through developing a global common standard for reporting oil reserves.

Finance ministers had been expected to discuss how the United States is dealing with its huge trade deficit and what policies other countries are pursuing to bolster domestic growth as a way of supporting US exports. Without referring directly to the United States, the draft called the task of addressing economic imbalances a "shared responsibility."

The US Commerce Department said Friday that the trade deficit rose to $63.4 billion in April after two months of rare declines, pushed higher by surging oil prices and a flood of imported furniture, televisions and toys from China.

In the face of calls in Europe to diversify energy supplies away from a strong reliance on Russia currently supplying a quarter of European energy, Moscow has insisted that predictable markets for its oil and gas are a key part of energy security. The draft appeared to acknowledge both positions.

"We recognize the importance of the principles of the Energy Charter, of diversification of energy markets and supply sources and of strengthened emergency response cooperation in ensuring energy security," the draft said.

Early this year, Moscow cut off gas supplies to Ukraine in a price war, resulting in a brief disruption to EU nations in the dead of the winter.

Europe has been pushing Russia to ratify the Energy Charter, which provides a mechanism for crafting predictable market conditions for producers and consumers alike. However, Russia has resisted EU pressure to ratify the document that would require it to open its export pipeline network and other energy assets to foreign investors.

The ministers also drafted a separate statement focusing on the need to support impoverished nations' access to energy supplies.

"We urge national governments and multilateral and bilateral donors to integrate energy issues into poverty reduction and country assistance strategies, including options for the least developed countries to tap their natural resources potential," they said.

The draft statement saluted the role played by emerging economies like Russia, China and Brazil in funding development projects in the world's poorest nations.

Russian Finance minister Alexei Kudrin on Friday touted a $700 million (euro553 million) debt write-off that would require debtor countries to use $250 million (euro197 million) of the money to combat infectious diseases, primarily malaria, and help improve energy infrastructure in African nations.

Among the other points in the draft, ministers reiterated their commitment to preparing contingency plans against an avian flu pandemic, emphasized the importance of education programs to enhance financial literacy and reaffirmed the need to strengthen safeguards against money laundering and terrorism funding.

Russia, which is leading the G-8 for the first time, is keen to flex financial muscles that have been buffed by billions of dollars in oil money flowing into its coffers at a time of record world prices. It is the world's second largest oil exporter after Saudi Arabia.

Separately, a spokesman for the German finance minister told Dow Jones Newswires that Germany was willing to accept early payment of euro1.3 billion ($1.6 billion) in Russia's Soviet-era debt, but warned that Moscow would have to pay a premium to retire the remaining euro6.4 billion ($8.1 billion) of its debt owed to Germany ahead of schedule.

Russia has offered to quickly pay down all of the $22 billion it owes to the Paris Club of creditor nations, but Germany has resisted Russia's offer of a full redemption of the debt it is owed, reluctant to lose the future income stream of relatively high interest payments over the next few years.