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Financial Times (UK)
July 15, 2003
Why is Russia dragging its feet on Kyoto?
By Michael Grubb and Yuri Safonov

Michael Grubb is visiting professor of climate change and energy policy at Imperial College, London, and associate director of policy at the UK Carbon Trust. Yuri Safonov is a research fellow, the Higher School of Economics, Moscow

When Tony Blair and Vladimir Putin opened the Russia-UK energy conference last month, one vital issue was conspicuous by its absence from the agenda. The Kyoto protocol, the treaty designed to tackle the threat of climate change and to stimulate clean energy investment globally, is now entirely in the Russian president's hands. It can come into force only if and when Russia ratifies it; without that, it fails. Yet 10 months after Mr Putin himself confirmed Moscow would do so, the Kremlin still refuses to hand the treaty on to the Duma for approval. On this critical matter, the two leaders had not a word to say.

Under Kyoto - the culmination of 10 years of global negotiations - the world's governments agreed an initial round of emission targets for greenhouse gases, together with market- oriented mechanisms for trading emission allowances and emission credits granted for clean energy investment. The agreement provides for subsequent rounds of negotiations to impose ever tighter controls.

The US rejection of Kyoto in 2001 was a blow but it was not fatal. Kyoto has now been ratified by 110 countries, including the European Union and many of its prospective members in central Europe, Japan, Canada and most developing countries. But with the US out, the treaty cannot enter into force without Russia - and the world is waiting.

Russia's prevarication is surprising, because the country stands to profit directly from Kyoto: its emissions declined rapidly with the demise of the Soviet Union and it now has surplus emission allowances to sell. The Russian Ministry of Energy is looking to Kyoto to help finance modernisation of its desperately inefficient energy system. Russia's two biggest energy companies - Gazprom and RAO UESR - have confirmed their support for Kyoto. Indeed, the government has stated that it accepts the political and economic arguments for ratification.

The delay could prove costly for Russia. The main buyers of emission allowances under Kyoto - the EU, Japan and Canada - are already developing their strategies. Some central European countries, which, like Russia, have surplus emission allowances, have already sold some to a Japanese trading house, using the revenues to improve ageing power stations. Ukraine, which is in the final stages of ratification, could do likewise. The market is beginning to slip away from Russia.

At the Russia-UK conference, Russia presented itself as a reformed character, a country "ready for business" along the lines of its western counterparts. The apparent lack of interest in Kyoto may suggest that this is only skin-deep: that Russia has not understood that regulation in areas such as the environment is an essential part of the package. Yet if that were true, pressure from the UK and German governments should have made the international stakes plain enough. Besides, the Russian government has stated that it accepts the political and economic arguments for ratification.

So why is Russia dragging its feet? Conspiracy theorists have noted several trips by senior US administration officials to Moscow. Over the past two years, the US has moved from initial indifference (or incredulity) about the rest of the world moving ahead without it, to recognition that if Kyoto enters into force, the momentum for global efforts to tackle climate change will be unstoppable and the US will ultimately have to compromise with it. Certainly there is antagonism between different Russian ministries, and within ministries, that could be exploited. Another - more likely - possibility is that Russia is simply hoping to secure concessions in other areas, such as accession to the World Trade Organisation and the status of Kaliningrad.

Whatever the reason, the Kremlin should stop delaying. At stake is not just a few billion dollars of foreign investment to help clean up Russia's energy system but also whether the international community can uphold a painstakingly negotiated agreement to tackle a grave global threat. Is Russia willing to back that endeavour - and, by extension, the role of the UN in dealing with global problems? By the time Tony next meets Vladimir, there should be answers, not silence.

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