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Australian Financial Review : October 17th 2006
FBA 010 The Australian Financial Review Tuesday 17 October 2006 www.afr.com 10World Edited by: email@example.com Breaking news at www.afraccess.com EU in thrall to Russian petro-power Vladimir Putin in Munich, Germany, last week . . . EU countries are scrambling to negotiate energy deals with Russia. Photo: AFP Geoff Kitney LONDON The rising petro-power of Russia is threatening to open serious div- isions in the European Union as individual countries seek to nego- tiate special deals that give them privileged access to Russian oil and gas supplies. The head of the European Com- mission, Jose Manuel Barroso, has made an urgent call to EU member states to speak with one voice to maximise Europe's leverage as Rus- sian energy supplies increase in importance. Mr Barroso's call comes before a summit of EU leaders in Finland this week that will discuss European energy security and will be attended by Russian President Vladimir Putin. With Europe facing the prospect of importing more than 80 per cent of its energy needs within 20 years, a scramble has developed among EU countries to try to negotiate long-term, secure energy deals with Russia ± now the world's largest oil and gas producer. Germany has signed an agreement with Russia for the supply of natural gas via a pipeline under the Baltic Sea, and other big EU powers ± including France ± are seeking closer relations with Russia in search of favourable energy deals. But other EU member countries, particularly those that were formerly members of the Soviet bloc, have expressed serious concern about the possibility that Russia will gain greater political leverage over Europe as a result of its petro-power. There is also concern in the United States about the growing leverage Russia will gain over Europe through the supply of energy, particularly as the US grows more alarmed about anti- democratic trends in Russia. This concern has sharpened in recent months, with signs that the Russian leadership intends to use Russia's rapidly increasing resources wealth to seek to regain a powerful role in world affairs as a countervailing voice to the US. Some US analysts say the Russia- Europe energy relationship has the potential to shift the global strategic balance against US interests. In his comments at the weekend, Mr Barroso did not address these bigger issues but focused on the need for Europe to use all its potential combined political muscle to ensure that European countries got fair deals in their negotiations with Russia. ''It is important to create a common [EU energy] market and not 25 or 27 markets,'' he said. ''We have to speak with one voice to third parties. ''Even the biggest member states don't have the possibility and the guarantee of getting what they want when they're on their own. ''We must show the strength of the internal market. It's in everybody's interests to resolve this together.'' Mr Putin's visit to the EU summit in the Finnish city of Lahti on Friday is likely to overshadow the rest of the summit's business. Brus- sels officials fear it could spark a dramatic show of disunity among EU member nations. The Finnish government, which holds the six-monthly rotating EU presidency, invited Mr Putin to help prepare the ground for a major summit next month between the EU and Russia that is expected to initiate formal negotiations on a new strategic partnership. Energy will be the major commercial issue in the negotiations. The energy issue has become more politically fraught following recent moves by Moscow to try to secure greater control over the operations of foreign energy com- panies operating in Russia, includ- ing European oil giants Royal Dutch Shell and British Petroleum. SE Asian coastal areas face total collapse, UN warns Reuters Growing populations and booming economies are threatening fragile coastal areas in East Asia, and the region's coral reefs could face total collapse within 20 years, according to a United Nations study. Although millions of people have been lifted out of poverty by econ- omic development over the past 15 years, the impact of rapid growth on the environment has been severe, said the policy brief from the United Nations Environment Program. ''Growing populations and their migration to coastal areas, dynamic economic growth, and rising global demands for fishery and aquatic products . . . have combined to exert tremendous pressure on East Asia's marine environment and coastal resources,'' the brief says. Fisheries, mangrove swamps, reefs, coastal wetlands and sea grass beds are all threatened. ''Studies warn that at the current rates of degradation, the region's coral reefs face total collapse within 20 years, while mangroves could be gone within 30 years,'' it says. Large areas of mangrove in Indonesia and Vietnam have been removed to make way for shrimp farms or to convert the land into farmland, the report says. ''Decades of advocacy, political commitments and conservation efforts at the national and regional levels have not prevented the East Asian seas from degrading at an ever-increasing pace.'' Some of the main causes of marine pollution in the region were from untreated sewage, and from rubbish and fertilisers ± problems also faced around the world. ''Despite international agree- ments, we keep pumping raw sewage into the sea,'' Veerle Vande- weerd, co-ordinator of the UN's Global Program of Action for the Protection of the Marine Environ- ment from Land-Based Activities, told a news conference. ''We keep on using more and more plastic, and at the end of the day it all ends up in the sea, and plastic cannot be degraded so it stays there,'' she said, at a marine protection conference in Beijing. Big payout as Scania keeps on trucking Bloomberg '' The magnitude of 35 kronor is indeed a surprise.'' Scania, Sweden's second-largest truck maker, plans to pay shareholders a special dividend of 7 billion kronor ($1.26 billion) as it resists a hostile takeover attempt by German competitor MAN. The payout, to come before the year's end, was worth 35 kronor a share, the truck maker said yesterday. Scania reiterated that an increased MAN offer still underestimated Scania's value. ''The magnitude of 35 kronor is indeed a surprise,'' said Patrick Juchemich, an analyst with Sal Oppenheim in Frankfurt, which has a neutral rating on Scania shares. ''We had expected a special dividend for 2006.'' At the weekend, Volkswagen, the largest shareholder in MAN and Scania, gave the two truck makers four weeks to come up with an ''amicable solution'' to a merger. Volkswagen said it would support a MAN takeover of Scania only if it gained the backing of other investors representing 56.01 per cent of Scania's voting shares. At a special meeting, Volkswagen's supervisory board reaffirmed the car maker's support for a MAN-Scania combination to create Europe's largest maker of commercial vehicles. Volkswagen chief executive Bernd Pischetsrieder has said he wants to include his Brazilian heavy-truck unit in any deal as he tries to compete with Volvo and DaimlerChrysler, the world's biggest truck makers. Volkswagen, with a 34 per cent stake in Scania and 15.1 per cent holding in MAN, said it would not support a counter-bid from Scania for MAN during the next four weeks. MAN, which last week bought more than 14 per cent of Scania's voting rights to reach Volkswagen's percentage requirement, will need to gain the backing of Swedish holding company, Investor. Thus far, Investor, which has 19.3 per cent of Scania's voting rights, has rejected two MAN offers. US urges China to be tough on N Korea Tony Walker WASHINGTON KEY POINTS Condoleezza Rice says China will 'live up to its responsibilities'. But Beijing has signalled it may not implement some of the sanctions. Dr Rice leaves for a tour of North Asia tomorrow. US Secretary of State Condoleezza Rice yesterday insisted China would join efforts to stop North Korea engaging in weapons proliferation, but US confidence in Chinese willing- ness to help shut down Pyongyang's arms business is not widely shared. Dr Rice, who leaves for a tour of North Asia tomorrow aimed at bolstering support for a United Nations Security Council resol- ution, said China's backing for the resolution amounted to an under- taking of ''co-operation in stopping the proliferation trade with North Korea''. Beijing, however, signalled early problems when it indicated it would not necessarily implement a key element of the sanctions package. This is the proposal for the interdic- tion of North Korean shipping to stop imports and exports of cargo that could be used to produce weapons of mass destruction. ''I am quite certain that China is going to live up to its responsibilities,'' Dr Rice told Fox News. ''I'm quite certain that China has no interest in seeing the proliferation of dangerous materials from North Korea.'' But China's UN ambassador, Wang Guangya, appeared to dam- pen US confidence in an activist approach by his country when he expressed doubt whether Beijing would enforce restrictions that ''would create conflict that could have serious implications for the region''. In response, Dr Rice said: ''Well, I don't think anybody wants to create conflict, but China is party to an international resolution ± a Security Council resolution ± that demands very clear co-operation of member states to make certain that dangerous goods are not getting in and out of North Korea.'' ''China has come a very long way in being willing to sign on to a resolution that makes China now responsible to make certain North Korea's not trading.'' David Kang, a Korea expert at Dartmouth College, reflected a fairly standard view when he told The New York Times, ''the sanctions are at best Kabuki theatre. They're not going to have much effect on North Korea's behaviour''. But the US is clearly pinning its hopes on a reasonable show of solidarity forcing Pyongyang to resume six-party talks broken off 13 months ago after North Korea accused Washington of provocations. The US has moved aggressively to try to stop North Korean counterfeit- ing of US dollars, and also its involvement in the international nar- cotics trade. Washington has put pressure on international banks to freeze accounts held by North Korea. America's bombastic UN ambassador John Bolton also sought to talk up China's support for the sanction package, saying Beijing would have been ''humili- ated'' by North Korea's nuclear test in defiance of repeated calls to desist. ''After all of the efforts they've made over the years to protect North Korea, for the North Koreans in the face of all that to test had to get quite a reaction in Beijing. And I think we're still seeing that play out,'' Mr Bolton said. Dr Rice will visit China, Japan and South Korea over the next few days.