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AFX News: Russian ambassador says Kremlin’s environment concerns on Sakhalin-2 genuine

LONDON (AFX) – Russian Ambassador to London, Yury Fedotov, today denied that environmental issues on the 20 bln usd Sakhalin-2 oil and gas project in Siberia were being used to cover the Kremlin’s desire to take a greater stake in the project.

In a briefing to journalists Fedotov said that the environmental issues flagged up at the project — whose operating company Sakhalin Energy Ltd is owned 55 pct by Royal Dutch Shell and 45 pct by Japan’s Mitsubishi Corp and Mitsui & Co — were genuine.

‘The problems of environment are real problems,’ he said. ‘When I came here a year go, in Russia they were more quiet about the environmental aspects of Sakhalin-2 but that culture was under severe attack from some respectful British organisations and NGOs and also the BBC — precisely because of environment concerns.’

The ambassador said he had been baffled by suggestions in British papers that Russia did not care about the environment.

‘I don’t see any room for conspiracy,’ he said. ‘The concerns about the environment are real concerns. I was shocked when I read one of the comments in the newspaper that the environment is a real mess and asking why we should express any concerns. I don’t accept that — we need more attention to environment issues — it’s good for society.’

Sakhalin-2, a 20 bln usd project in the far east of Russia, developed by a consortium led by Shell, is threatened with suspension by the Russian authorities.

The authorities have said the project is harmful to the environment on Sakhalin Island and that the running of the project is unfavourable to Russian interests.

Fedotov’s comments come amid claims by some parties that the Russian government is using a more active interest in environmental issues at Sakhalin-2 as a front to renegotiate the contract after Shell doubled the costs of the contract to 20 bln usd.

Russia is thought to want its gas arm Gazprom to take a greater stake.

But the ambassador rejected these accusations and moved to reassure potential investors that Russia was committed to forging strong commercial links with western companies through its energy resources.

‘It’s part of the Russian strategy to be a reliable supplier of energy resources to many countries in Europe and also in Asia,’ he said.

‘I don’t recall any official statements that Shell broke its commitments on the contract but it did increase the cost of the project twice and as a result presented documentation which is being reviewed. The amount of papers to be reviewed can fill this room.’

AFX reported yesterday that the Russian government would take a definitive decision on the possible suspension of the Sakhalin-2 project in the third week of November, according to Russian Natural Resources Minister Yuri Trutnev.

The minister is ready to grant the operator of the project an extra week to present a project to repair environmental damages, which it should submit before Thursday, according to the Prime-Tass financial news agency.

After a meeting between UK Ambassador Anthony Brenton and head of the Russian chamber of accounts Sergei Stepashin, the institution said in a statement last night that the UK side would propose ‘a supplement to the production-sharing agreement’, which would amend the economic model of the project.

However, a spokesperson from the UK embassy told Agence France-Presse that this information was ‘not correct’. Shell is trying to clarify its situation with the Russian government, and it is up to Shell to comment on its complex negotiations, the spokesperson said on condition of anonymity.

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