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. Last Updated: 07/27/2016

Leaked G8 Paper Is Open to Interpretation

ReutersPutin arriving at the Gleneagles Hotel on Wednesday for the G8 summit.
President Vladimir Putin looks set to sign an international pledge to remove barriers to investment in the oil sector, despite his government's efforts to push through a law that would curtail foreign participation in energy projects.

Even before Putin joined leaders of the seven leading industrialized nations at the Group of Eight summit in Gleneagles, Scotland, on Wednesday, a leaked draft of the meeting's final communique was making the rounds.

The draft statement on the world economy, leaked to Reuters, called for "the removal of barriers to investment throughout the [oil] supply chain" to counter high and volatile prices, which the document singled out as the greatest economic challenge facing the world this year.

An unidentified G8 diplomat, who provided the document, told Reuters that the draft is expected to differ little from the one to be signed by the eight world leaders on Friday.

Putin is set to take over the chairmanship of the G8 in 2006 and has said that "energy security" will top the agenda when he hosts next year's summit in St. Petersburg.

The Foreign Ministry declined to discuss the document, and the Kremlin press service was unavailable for comment.

While the wording of the draft appeared to contradict recent efforts by the government to close its grip on "strategic" sectors of the economy like oil, experts said the document should be seen as a sign of good will rather than as a fundamental shift in energy policy.

"It is typical consensus: Each side can interpret it in its own way," said Fyodor Lukyanov, editor of the journal Russia in Global Affairs.

For the West, the language in the communique expresses a wish to participate in Russia's lucrative energy sector, while for the Kremlin the wording is fuzzy enough to mean it is committed to keeping the oil flowing.

Since his election in 2000, Putin has repeatedly said that Russia will be a dependable energy supplier, even as his government has failed to free up pipeline bottlenecks and scared off investment with the smashing of oil giant Yukos.

The draft statement "is hinting at our [high] export duties and at the fact that we do not have enough investments in crude transport, which in turn slows down oil output," said Vladimir Frolov, deputy general director at the Fund for Effective Politics, a think tank headed by Putin political adviser Gleb Pavlovsky.

For example, the government has postponed deciding on a proposed pipeline that would carry Western Siberian oil to Murmansk. It has also put off a decision on whether to build a Pacific pipeline to Japan -- another G8 member -- or China.

Partners in the G8 are now looking for concrete decisions, and in advance of next year's summit, the government is likely to make them, Frolov said.

"I think Putin will invite foreigners, including the Japanese, to participate in building pipelines, but under Russia's laws," he said. Russian legislation allows international financing but preserves the government's monopoly over all pipelines.

Meanwhile, Moscow is also moving to codify restrictions on foreign investment in so-called strategic sectors.

With the Kremlin well on the way to consolidating the energy sector, Lukyanov said, it could actually start delivering on pledges to foreign partners.

"From the beginning, the Americans thought the 'energy dialogue' would lead to large American private companies doing business with large Russian private companies," he said. "But the Russians understood it to mean that the Russian state would take back control over the energy sector" and ensure a dependable flow of oil.

"Now, having reached the 'commanding heights' of the economy, the Kremlin is saying: 'OK, we're ready to deliver -- but on our terms.'"

Many countries restrict oil sector investments on national security grounds, and singling out Russia is unfair, said Stephen O'Sullivan, co-head of research at United Financial Group.

In the United States, President George W. Bush is under mounting pressure to block a bid by China's state-controlled CNOOC to buy the No. 8 U.S. oil firm, Unocal.

"I look forward to the day when LUKoil bids for [France's] Total, and we see how far it gets," O'Sullivan said.

"The reality is that you'll never control a major Russian field again if you're a foreigner. That was an aberration of the 1990s."

Nonetheless, Moscow is still interested in making investment easier for projects with foreign minority stakes, O'Sullivan said, as Russia asserts its role as a global energy player.

Such projects include the future export of liquefied natural gas capacity to the United States.

Whatever specific promises Putin intends to make at the summit, the communique's focus on energy already appears to be a victory for him.

"Experience suggests that when people start talking energy, the issues that [Russians] do not like discussed, such as human rights and democracy, take the back seat," Lukyanov said.

 Putin will push the G8 to work toward giving the United Nations a leading role in Iraq, as well as setting a possible time frame for U.S.-led forces to end their mandate, a Kremlin official said Wednesday, The Associated Press reported.

The spokesman also said the G8 should endeavor to widen the political process in Iraq. Although it is not central to the agenda of the G8 meeting, Iraq is expected to be a key topic of political discussion, in addition to regional conflicts in Afghanistan, the Middle East, the Darfur region of Sudan and Kosovo, the Kremlin official said.