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Wednesday, August 09, 2006

EU closely monitoring Gazprom deal as Italy sounds alarm

09.08.2006 - 09:30 CET | By Honor Mahony

Italy has warned that a deal between Russian and Algerian energy companies may lead to a rise in gas prices in Europe.

Italian energy minister Pierluigi Bersani has written a letter to EU energy commissioner Andris Pielbags suggesting that any deal between Russian monopoly Gazprom and Algerian state company Sonatrach would increase Europe's dependency on a small number of gas concerns risking pushing up the prices.

Both companies signed a memorandum of understanding over the weekend on closer cooperation in several areas.

"[The deal] confirms the concern already expressed about the effects on gas supplies to the European system, and on Italy in particular, derived from the dependence on imports from a limited number of supplying countries, which is expected to worsen in the coming years," Mr Bersani said in the letter, according to Reuters.

A European Commission spokesperson said that Brussels would follow the deal closely - Gazprom has been at the top of the executive's to-watch list since the vast state monopoly in April warned that it would consider delivering its gas elsewhere if investment opportunities in Europe were blocked.

Italy has particular interest in any cooperation between the companies as it gets most of its gas supplies from these two countries - some 32 percent comes from Russia and 37 percent from Algeria.

Rome already felt the gas pinch earlier this year when an energy tiff between Russia and Ukraine lead to Italy having to take emergency steps and restrict energy consumption.

That situation also prompted Brussels to put energy concerns at the top of the political agenda, with Gazprom already providing one quarter of Europe's gas needs.

The commission is pushing to have an open EU energy market by mid next year believing this is the answer to Europe's energy security.

However, it is facing stiff resistance among member states opposing foreign takeovers of their national energy companies.

Earlier this year, the International Energy Agency (IEA) expressed concern about the increasingly monopolistic status of Gazprom.

"Europe must change its energy policy in order to avoid becoming too dependent on Russian gas", said IEA chief economist Fatih Birol.
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