Russia Energy Minister:Pricing In Euros Up To Private Oil Companies

MOSCOW -(Dow Jones)- Russian Energy Minister Igor Yusufov said Friday that the government won't play an active role in shifting the denomination of oil contracts from U.S. dollars to euros.

"It's a decision that will ultimately be made between the buyer and the seller," Yusufov told reporters at a briefing. "I don't see anything negative in going into a euro-based system." Yusufov's statement comes one day after Russian President Vladimir Putin (news - web sites) said that pricing of oil contracts in euros was "possible".

Yusufov said that he saw a possible deal between Russia's largest oil company YukosSibneft, a product of the merger between OAO Yukos and Sibirskaya Neftyanaya Kompaniya (SIBN.RS), and U.S. oil major ExxonMobil Corp (XOM) as " positive".

In an interview with the New York Times, published Saturday, Russian President Vladimir Putin confirmed he knew about negotiations between YukosSibneft and ExxonMobil.

It had been reported earlier that several foreign firms, including ExxonMobil were in talks with YukosSibneft to acquire a significant equity stake in the Russian oil company.

Some skeptics of the deal say that Yukos' legal woes would preclude any transaction with a foreign company from taking place.

Federal prosecutors have accused Yukos' shareholders of stealing state property and avoiding taxes. Arrested in July, one Yukos shareholder is in jail awaiting trial.

Yusufov said the prosecutors' investigations weren't related to the company's operations.

Separately, Yusufov said that the government had "no deadline" for reform of Russia natural gas sector.

"The government is still analyzing how it will affect Russia's economy," Yusufov said. "We can't take a single step forward until we know how this process will end."

The Russian government has made little progress in reforming its gas sector and lessening the dominance of gas monopoly OAO Gazprom (GSPBEX.RS), which produces 88% of Russia's gas and owns the nationwide trunk pipeline system.

Some government officials have pushed for breaking apart the gas giant's transportation and production divisions. Yusufov said that a break-up of Gazprom would be an "extremely radical" solution.

Analysts say that reform of Russia's gas industry is so politically sensitive that it will be put off until after the presidential election in March.

As a monopoly, Gazprom has a special status. It can only sell gas at federally regulated prices and must ensure supplies to all consumers, both paying and non- paying.

Gas prices on Russia's domestic market are several times lower than prices in Europe. The European Union (news - web sites) says low gas prices subsidize Russian industry and has made Russia's entry into the World Trade Organization (news - web sites) contingent on freeing gas prices.

Here's the related story from The Russian Journal.com:

MOSCOW - Russia appears to be digging in its heels in long-running negotiations on joining the World Trade Organization, the Wall Street Journal reports.

The failure of global trade talks in Mexico last month gave the Kremlin more time to bargain and emboldened domestic opponents of trade liberalization. Although President Vladimir Putin has made joining the WTO one of the main goals of his economic policy, which had to be achieved in a matter of several months, nobody speaks about an exact target date now, the newspaper continues. Diplomats say progress has been slow in talks on the dozens of bilateral deals with WTO members. The easier issues have been resolved, but the politically difficult ones remained.

Mr. Putin Thursday lashed out at what he called "Eurobureaucrats" for attempts at "arm-twisting" in the talks, the WSJ notes. "Russia's arms are getting stronger and stronger," the Russian President pointedly told a gathering of Russian and German business leaders, including German Chancellor Gerhard Schroeder, in the Urals city of Yekaterinburg. This statement means Russia’s unwillingness to give in to European countries, which insist that Russia move more aggressively to raise its low domestic prices for natural gas and liberalize that highly regulated market as a condition for accession. "We'd wreck the economy" by moving too fast, Mr. Putin said, according to the newspaper.

Russia’s tough stance also reflects the fact that the WTO seems to be more interested in Russia’s accession that Russia itself. Following the failure of the Cancun talks, the WTO is facing hard times, while Russia, with its economy relying mainly on raw materials, is not ready to pay a high price for the ‘entry ticket’, in contrast to China, the WSJ says.

Speaking at Russian-German consultations in Yekaterinburg on Thursday, Vladimir Putin stated that Russia was going to retain state control over the gas pipeline system and the gas company Gazprom. In this respect, he pointed out that the European Commission’s demands regarding access to the Russian gas pipeline network were unacceptable to Russia. The EU demands that Russia should allow Europe to use its gas pipeline system, and sees it as one of the conditions for Russia’s admission to the World Trade Organization. The President stressed that the gas pipeline system of the Russian Federation was “the offspring of the Soviet Union”, and only Russia could “maintain it in working condition, even regarding its parts outside the country”, the Presidential Press Service reports. “We will not divide Gazprom,” Vladimir Putin said. He added that the European Commission should have no illusions on this account. “In the gas sphere, they will have to deal with the state,” the President stressed.

For his part, Russian Economy Minister German Gref issued a strongly-worded statement on Thursday. He said the Russian-WTO talks had stalled, and they might be suspended for one year.

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