RUSSIA - Oct. 16 - Toughens Stance On Energy Prices.

Moscow toughens its stance in discussions with the EU over energy prices, insisting it will not abandon the exports monopoly of Gazprom as a condition for entry into the WTO. The EU trade commissioner, Pascal Lamy, says at the end of trade negotiations in Moscow that for the first time he had received "an extremely clear signal" from the Russian PM, Mikhail Kasyanov, that the export monopoly was a "red line" that it would not be willing to cross. The comments followed equally harsh remarks by the Russian president, Vladimir Putin, last week that he would resist demands for excessive liberalisation of the Russian gas market. The difference between export prices and far lower domestic gas prices in Russia is proving a sticking point in talks over WTO accession with the EU, which Russian officials last week described as reaching a "dead end". However, Mr Lamy says that progress had been made at the talks and that "we have started converging towards a final design". He says he was not ready to say whether or not EU member states would agree to respect the export monopoly demands, but stressed he was aware of the extreme sensitivity of the issue. He says the EU had no intention of damaging Gazprom, Russia's gas monopoly, and jeopardise one of the EU's leading gas suppliers. He stresses that gas prices had to be "market framed", with pricing in the domestic market sufficient to cover costs plus an additional margin to provide for the cost of capital and investment. This would leave Russia with its "natural comparative advantage" of abundant gas reserves. At the conclusion of today's talks Kasyanov says he wanted to see Russia enter the WTO on "normal conditions". But the EU has said it would not move on its demand that Russia introduce a more market-oriented pricing system. "We are prepared to talk about transition periods, we are prepared to talk about flexibility, " a Brussels trade official says. The EU had hoped that a deal it struck with Saudi Arabia earlier this year in the run-up to its WTO entry, in which Riyadh agreed to abolish its dual energy pricing scheme for domestic companies, would serve as a precedent. But Brussels officials admits Russia had made clear it would not accept a deal along those lines. The Commission is also at loggerheads with Moscow over the payments European airlines make to Russia's Aeroflot for Siberian overflight rights and access to the telecommunications market. EU carriers pay about $220m (?189m, [pounds sterling]131m) a year for the right to fly over Siberia, a crucial route for flights to the Far East. The Commission argues that Russian carriers and other foreign airlines have to pay far less. On telecoms, Brussels is concerned at recent efforts by the government to grant Rostelekom, Russia's biggest telecoms company, a six-year monopoly over international calls.