G8 Finance Ministers Focus on Energy Crunch

ST. PETERSBURG, Russia, June 12, 2006 (ENS) - Global growth remains strong and is gradually becoming more broadly based, but "downside risks" from high and volatile energy prices and widening global imbalances remain, said some of the world's most powerful finance ministers Saturday. The ministers met for two days to prepare for the Group of Eight (G8) Summit in July hosted by Russia in St. Petersburg.

The G8 countries are Canada, France, Germany, Italy, Japan, Russia, the United Kingdom, the United States. The meeting was also attended by representatives from Australia, Brazil, China, India, Nigeria and South Korea.

In a joint statement, the finance ministers called for comprehensive action by both producing and consuming countries to facilitate investment in the energy sector, and improve energy efficiency, including through national initiatives. Energy is one of the overarching themes of this year's annual G8 Summit.

Russian Finance Minister Alexei Kudrin hosted the G8 finance ministers in St. Petersburg. (Photo courtesy Sergey Mironov)

"We recognize the importance of the principles of the Energy Charter, of diversification of energy markets and supply sources, and of strengthened emergency response cooperation in ensuring energy security," the ministers said.

They encouraged the IMF and the World Bank to work with both producing and consuming countries to develop "guidelines on appropriate policies to mitigate the adverse impact of high and volatile energy prices."

To meet the threat to economic growth posed by high energy prices, U.S. Treasury Secretary John Snow called on oil producers to increase production and for consuming nations to "intensify their efforts to economize on the use of oil."

Snow pointed to a world economy characterized by high growth rates among developing economies, historically low levels of inflation, and no visible signs of major financial crises or recessions.

U.S. Treasury Secretary John Snow said he expects this year's G8 Summit to be productive. (Photo courtesy Office of the Secretary)

The finance ministers urged developing countries to reduce obstacles to private energy companies. "We stress the private sector's crucial role in energy services, and urge developing countries to lower barriers through the adoption of a clear-cut and effective normative basis," the statement says.

The G8 partners point out the need to focus energy strategies on the least developed countries, with an emphasis on access of the most vulnerable population groups in those countries to modern energy services, and on sufficient supply of electricity and other energy resources to schools and hospitals.

They highlighted the importance for broader access to cleaner household fuels, which would reduce air pollution.

African countries south of Sahara are the most vulnerable in terms of energy resource access, the G8 finance ministers said.

The ministers welcomed Russia's decision to join the other donors and contribute $30 million to the Global Village energy partnership foundation, which will make allocations to ensure the access of African countries south of Sahara to modern energy sources.

The ministers also welcomed more donations to the IMF Anti-shock Foundation, which assists the least-developed countries in the context of high energy prices. The ministers called donors to step up aid and so help to overcome energy scarcity.

The finance ministers focused on the risk of an avian flu pandemic, saying it requires preparation through facilitating cooperation across countries in drafting contingency plans, including for the financial sector.

At the meeting, Russian Finance Minister Alexei Kudrin and World Bank Group President Paul Wolfowitz agreed to work together to help poor countries in the areas of debt relief, infectious diseases, energy and development.

Wolfowitz and Kudrin agreed to collaborate in developing a debt-for-development swap arrangement to channel US$250 million for priority needs in Sub-Saharan Africa. The World Bank is developing projects and programs to support countries’ efforts to fight infectious diseases such as malaria and improve access to energy services in several eligible highly indebted poor countries that could provide a framework to deploy additional funds and to monitor their use.

The Russian Primorsk oil terminal on the Gulf of Finland. Environmentalists are concerned the spills and leaks from the the terminal will contaminate the nearby Beryozovy Islands wetland, seen in the background, and designated under the Ramsar Convention as a Wetland of International Importance. (Photo courtesy Greenworld)

According to their joint statement, Russia and the World Bank will explore opportunities to facilitate investments in the energy sector through investment guarantees and efforts to boost the role of small-scale private energy providers.

The joint statement re-affirms the importance of enhancing coordination between traditional donors and emerging ones like Russia. The World Bank agreed to provide technical assistance to the Russian authorities in establishing a national system for official development assistance.

Wolfowitz and Kudrin said their collaboration would place a strong emphasis on results and they agreed to take stock twice a year at the time of the World Bank/IMF spring and annual Meetings. The 2006 World Bank/IMF Annual Meetings will be held in Singapore September 19-20.