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Birth of G-8: Russian scholars

Vladimir Radyuhin

The agenda of the industrialised nations' club has changed: expert

MOSCOW: The Group of Eight summit in St. Petersburg marks the death of the industrialised nations' club as it was originally conceived, Russian scholars said.

"The G-7 set up to confront the price dictat of the Organisation of Petroleum Exporting Countries [OPEC] is no longer there," Sergei Guriev of the Russian Economics School said. Not only has Russia joined the group making it G-8, but its agenda has changed.

"The main problem for the industrialised nations today is not oil prices as such, but stability of prices and security of supply," Mr. Guriev said.

The change of agenda was due to two main factors. One was the increased resilience of G-7 economies to higher oil prices.

"With oil prices crossing $70 a barrel, the G-7 economies keep growing and their inflation rates stay low," said Mr. Guriev.

The second factor was the emergence of Russia as the world's biggest energy producer, which changed the balance of forces between oil exporting and oil importing countries.

Before that OPEC's ability to stand up to the rich oil-importing nations had been seriously undermined by a conflict between the "hawks" led by Iran and the "doves" led by Saudi Arabia, says Viktoria Panova of the G-8 Research Group.

Upper hand

This eventually helped the G-7 to get the upper hand over OPEC. The G-7 nations cut the share of oil in their energy consumption from 53 per cent in the 1974 to 40 per cent in 1990, and invested heavily in oil fields outside OPEC, bringing down its share in global oil production from 55 per cent in the 1970s to 42 per cent today.

When Russia joined the G-7, the other members of the group hoped it would play on their side against OPEC. At the G-8 summit in 2005, U.S. President George W. Bush described Russia as the only reliable exporter of energy resources. However, Russia went on to play its own game. Russia's new doctrine of energy security formulated this year calls for the security of energy exports at "fair prices" to have the same priority as the security of supplies. This doctrine has put Russia on the side of OPEC. Moscow has gone a step further, threatening to form a "gas OPEC" if the West rejects its concept of energy security.

Therefore, the G-8 no longer presents a united front ready to take on OPEC. "G-8's new agenda is to hammer out a compromise between energy producers and consumers. This gives Russia a good chance to push through its concept of energy security at the summit."

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