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Daily Mail: Shell’s Russia row reaches United Nations

Margaret Beckett

Margaret Beckett

By Sam Fleming
Friday 22 September 2006

THE crisis over Royal Dutch Shell’s Sakhalin-2 oil and gas project has erupted into a diplomatic row between Britain and Russia.

Foreign Secretary Margaret Beckett challenged her counterpart Sergei Lavrov over the issue at the United Nations in New York, it emerged yesterday.

The UK is said to be making ‘high-level’ representations amid fears that the Western energy industry is under concerted attack by the Kremlin.

Relations between the countries were strained earlier this year after Russia threatened to turn off gas supplies to the Ukraine and expressed interest in buying British Gas owner Centrica.

Western analysts believe Russia is trying to extract a large stake in the Sakhalin-2 project for state monopoly Gazprom.

The firm has halted discussions with Shell over plans to take a 25pc holding via an asset swap.

A Foreign Office source said: ‘We are expressing our concerns to the Russian government at a number of levels.

‘We are yery concerned by this issue, particularly because we have had a very good dialogue over the last 18 months about the importance of two-way trade and invest¬ment between the UK and Russia.’

The withdrawal of the Shell consortium’s environmental permit to operate the £10.5bn Sakhalin-2 development has derailed a crucial international government loan.

The European Bank for Reconstruction and Development shelved a decision over whether to grant hundreds of millions of dollars in support until the legal chaos is resolved.

The Japanese junior partners in the project, Mitsui and Mitsubishi, are believed to be ready to sell some of their stakes to Gazprom in a bid to defuse the row.

Shinzo Abe, who is likely to be Japan’s next prime minister, said earlier this week that he was concerned delays would have a ‘negative influence on overall Japan-Russian relations.’

Sergei Fyodorov of Russia’s ministry of natural resources hit back, claiming his country is losing hundreds of millions of dollars in potential revenue because of unfair deals signed in the 1990s. He attacked agreements struck not only with Shell but with Exxon of the US and Total of France.

BP yesterday denied Russia threatened to withdraw its licence for the huge Kovykta gas field.

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