Berlin - Russian Prime Minister Vladimir Putin and German Chancellor Angela Merkel accused each other of hindering trade and investment on Thursday ahead of talks which may result in the biggest German divestment from Russia to date.
In an article published in Germany's Sueddeutsche Zeitung newspaper Putin warned that European legislation aimed at liberalising energy markets could hurt investment and eventually lead to energy shortages in Europe.
The European Union agreed in March 2009 to liberalise energy markets by splitting giant utilities, ensuring that small gas suppliers can get unhindered access to European infrastructure and compete on an equal footing with the dominant players.
The plan included a so-called “Gazprom Clause” designed to prevent companies from outside the bloc - such as Russia's state-controlled gas giant Gazprom - from buying up strategic distribution networks without approval by governments.
“It creates serious risks in the European energy sector and undermines investors' plans to put their money into new projects,” Putin said in the article, warning that the plan will result in higher prices for energy.
Merkel responded by lambasting Russia's protectionist trade measures which are hurting German exports and said that Putin's policies contradicted his stated aim to create a free trade zone stretching from Lisbon to Vladivostok.
“The steps that Russia has taken recently do not exactly point in that direction,” Merkel told reporters. “I hear time and again from Russia that import duties are being repeatedly raised without warning.”
Merkel also criticised Putin's pet project of a Customs Union between ex-Soviet neighbours Russia, Belarus and Kazakhstan, saying the union made a trade agreement with the EU more difficult.
Putin wants to revive Russian industry through a policy that will force foreign firms to invest in production. His government raised or plans to raise a number of import duties on goods ranging from cars to some handheld communication devices.
Russia also wants to diversify trade away from Europe, which it sees as a stagnating market, to Asia through building new pipelines and promoting corporate deals. China is on track to overtake Germany in terms of Russian trade volumes.
Putin and Merkel will also discuss a deal under which Germany's E.ON would sell a $4.5-billion stake in gas giant Gazprom to state-owned Russian bank VEB, chaired by Putin.
E.ON, the world's largest utility, is currently the biggest German investor in Russia but the company is struggling to cope with high debts and falling revenues and has announced plans to divest from non-strategic assets.
The Russian government has put on a brave face over the potential sale, saying it is bullish on Gazprom.
However, the government's willingness to pay a premium over the market price reflects concerns over Gazprom's falling share price as more European clients turn to cheaper gas from other sources.
The government may also use the 3.5 percent stake in Gazprom currently owned by E.ON for asset swaps, which have emerged as a new strategy for Russia to get a foothold in foreign energy markets - Reuters