Putin, Merkel trade barbs ahead of talks in Germany

* Putin to meet Merkel and German businessmen

* Criticises EU energy sector policy

* Merkel says Russian trade policy protectionist

* Deal to sell Gazprom shares may be announced on Friday

By Gleb Bryanski

BERLIN, Nov 25 (BestGrowthStock) – 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. [ID:nLDE6AO0C3]

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 (GAZP.MM: ) — 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.”

E.ON SALE

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 (EONGn.DE: ) would sell a $4.5 billion stake in gas
giant Gazprom (GAZP.MM: ) to state-owned Russian bank VEB, chaired
by Putin. [ID:nLDE6AN01Q]

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. [ID:nLDE6AN01Q]

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.
(Additional reporting by Andreas Rinke in Berlin and Darya
Korsunskaya in Moscow; editing by Andrew Roche)

Putin, Merkel trade barbs ahead of talks in Germany