RUSSIA - Oct. 21 - Russia-EU Strategic Partnership Based On Petroleum & Power.

A deal has been set for the EU to substantially raise oil, gas and power purchases from Russia as part of a 20-year strategic partnership pact. At the end of October, President Vladimir Putin will travel to Paris to sign a series of related contracts. This should greatly escalate the degree of mutual dependence linking the largest nation in terms of land mass with one of the world's leading commercial powers. The pact is also to be signed by French President Jacques Chirac and the EU's Executive President Romano Prodi. Russia hopes to lure billions of dollars in EU capital investments to improve its dilapidated facilities for producing and exporting oil, gas and power. The EU foresees an opportunity to diversify fuel sources at a time of soaring oil prices and turmoil in the Middle East. Prodi says: "As the EU embarks on a process of enlargement  that could expand its membership to as many as 28 countries in the next few years, we need to make sure there are no new walls built with our large neighbour to the east. Our goal is to expand the zone of stability to Russia itself, so all of our citizens feel safer". Besides the economic advantage of securing reliable fuel supplies at steady prices, EU officials believe the pact will serve as a harbinger for greater political co-operation between Russia and Europe. Prodi's spokesman Jonathan Faull says: "The European Union is already a customer of Russia for its oil exports. We want to change the commercial relationship into a long-term strategic partnership that will help stabilise Russia, which is in the interests of all parties". (The creation of an 'energy bridge' between East and West has long been one of Europe's most elusive geopolitical goals. In the early 1980s, Europe was eager to fund construction of a pipeline with the Soviet Union that would have greatly expanded natural gas exports to the West. But that Cold War deal foundered over hostility from the US, which warned its European allies that the pipeline would create a precarious dependency that could be exploited by Moscow. This time, the visionary goal of pumping vast quantities of Russian oil, gas and power into West Europe is widely recognised as a healthy political development. President Clinton and Chancellor Schroeder are among the project's most enthusiastic supporters. They see it as a useful way of purging Russia's debts and getting Moscow to contribute to European security. With North Sea oil supplies diminishing, Europe will soon be importing as much as 85% of its energy supplies. Currently Russia provides only about 20% of Europe's gas needs and 16% of its oil supplies, and EU officials say they hope the pact will soon lead to a doubling of imports from Russia. This week, the Russian gas giant Gazprom announced it was forming a new consortium with leading gas companies from Germany, France and Italy to build a $2b pipeline for gas exports that will bring an extra 60 BCM/y to the EU. The 600-km project would involve two lines crossing through Belarus, Poland and Slovakia. The decision to bypass Ukraine, which would offer a more direct route to Western markets, came after much criticism from Gazprom that Ukraine had refused to pay $2b in debts and was illegally siphoning off gas destined for West European customers. Ukraine's President Kuchma dismissed the complaint as another example of Russia's seeking to intimidate its neighbours. Russia also plans to increase its power exports to the West. The head of Russia's national power company Anatoli Chubais says several new contracts have been signed with Germany and fresh power supplies from Russia have been flowing there since August). Chubais says: "We have proven that besides raw materials like oil and gas, we can penetrate Western markets with our electricity, which is much more advanced in terms of value added. We are ready to show that the energy bridge to the West can become much greater than most people realise".