Russia changes energy strategy

Natural gas will be freed up for delivery under export contracts, while domestic energy needs will be reoriented toward other fuel sources.
That is the essence of the new energy strategy, which had been under development in the presidential administration since the middle of in September.

It was given the blessing of Russian President Vladimir Putin at a meeting chaired by the president and attended by Prime Minister Mikhail Fradkov, First Deputy Prime Minister and chairman of the board of directors of Gazprom Dmitry Medvedev, ministers, and representatives of the presidential administration, RAO UES of Russia and the Federal Agency for Atomic Energy (Rosatom).
The main topic on the agenda at that meeting was the price increase for domestic industrial gas consumers from $ 44 to $ 80 per 1,000 cm.

Gazprom head Alexei Miller took ill and was unable to attend. In his place, Minister of Industry and Energy Viktor Khristenko and RAO head Anatoly Chubais argued for the price increase. Chubais favours the increase because the electricity holding would then be able to demand additional gas supplies for electric plants now being built and a price increase for electricity.
The president did not give his support to that idea, however. He agreed, after hearing Khristenko's report, that the price of electricity should be raised, but not that a price increase for electricity should be tied to gas supplies to RAO.
“You are trying to reorient strategically important export supplies to your own needs,” Putin commented at one point.

Instead, the president asked for a recalculation of Russia's energy balance with more emphasis placed on coal and atomic energy. Thus, Miller received permission in absentia to increase gas imports, one of Russia's most effect foreign policy instruments recently.
Last year, Gazprom exported 151 bn cm of gas, and that figure is to increase to 180 bn cm by 2010. At the same time, liberalization of the domestic market is seen as unavoidable. A Gazprom spokesmancommented that the uncontrolled growth of gas consumption in Russia due to artificially low prices “does not guarantee the security of the energy system.” Gazprom holds that dependence on a single energy source implies an increased risk in case of acts of God.

There are not a large number of alternatives to gas -- hydroelectric generation, coal, atomic energy and heating oil. The use of heating oil will remain almost twice as expensive as gas even after gas prices are raised. Nor does the nuclear industry see great perspective for playing a larger role in the energy balance since those facilities are already operating at fill capacity.
Coal is the choice remaining, and the option under consideration since September. Representatives of the coal industry were not present at the meeting, however.