VITAL gas supplies to Western Europe are at the mercy of shady middlemen who have taken control of the gas trade between Russia, Ukraine and Turkmenistan, it was alleged yesterday.

Their unregulated business dealings have contributed to a sharp rise in the price of gas in leading markets, including Britain and Germany. Their secretive company, RosUkrEnergo, which has a monopoly of billions of dollars of gas sales to Ukraine, is being investigated by the organised crime division of the US Justice Department.

At the same time Angela Merkel, the German Chancellor, is expected to press President Putin to guarantee the security of gas supplies when she meets the Russian leader this week.

Yesterday the British non-governmental organisation Global Witness called for an investigation into RosUkrEnergo and urged the European Union not to enter into any agreements with the leadership of Turkmenistan until there was greater transparency in the gas trade.

The organisation also called on the Kremlin to show leadership on energy security — the theme of Russia’s debut year in its presidency of the G8 — by investigating allegations of wrongdoing in the gas sector.

“Lack of transparency makes it impossible for the people of Turkmenistan and Ukraine, or gas customers in Western Europe, to know who really controls this trade and where the profits go,” Tom Mayne, a Global Witness campaigner, said.

“The EU is forging a long-term strategy on how to source and use energy. But this strategy won’t be credible unless it promotes transparency and good governance in countries which supply Europe’s energy, because instability in these countries could ultimately threaten energy supplies.”

RosUkrEnergo emerged as a key player in the gas trade between East and West following a protracted gas dispute between Russia and Ukraine in January.

Gazprom, the Russian monopoly, cut off supplies to Ukraine on New Year’s Day to force Kiev to pay more for gas, severely disrupting deliveries to the rest of Europe. Russia said that it was phasing out subsidies for Ukraine and other former Soviet republics and accused Ukraine of stealing supplies destined for Western Europe.

Kiev denied this and accused the Kremlin of punishing it for the 2004 Orange Revolution.

Gazprom’s move raised doubts in the West about Russia’s reliability as an energy partner and prompted calls for the EU to reduce its dependency on Russian oil and gas. Gazprom and Naftogaz, the Ukrainian state gas company, reached a new deal on January 4 under which Russia and Turkmenistan supply their gas to Ukraine through RosUkrEnergo.

The Switzerland-based company is owned half by Gazprom and half by Raiffeisen Bank, of Austria. But Raiffeisen is acting on behalf of beneficiaries who have never been identified. The Global Witness report was published three days after the US Justice Department confirmed that it was investigating RosUkrEnergo.

Company executives travelled to America two months ago to discuss its structure with department officials and US authorities have reportedly requested information about RosUkrEnergo from the Austrian Government.

Global Witness said that it also had a letter showing that doubts over RosUkrEnergo’s ownership structure and affiliates prompted its auditors from KPMG International to resign in November. Global Witness named two top Ukrainian officials who had held key positions in RosUkrEnergo. And it identified a group of British businessmen who, it said, had worked with RosUkrEnergo and also played key roles at its equally opaque predecessor, Eural Trans Gas.

It also alleged that President Niyazov of Turkmenistan kept most of his Central Asian nation’s estimated annual gas revenues of $2 billion (£1.12 billion) off the books. “Niyazov keeps most of the gas revenues under his effective control in overseas and off-budget funds,” it said. “Most worrying of all, it seems that no money from the sale of Turkmen gas even makes it into the national budget.”

Global Witness alleged that Mr Niyazov kept $2 billion in the Foreign Exchange Reserve Fund at Deutsche Bank, of Germany, in an account that he alone had access to.

“It is hard to reconcile Deutsche Bank’s role in managing Turkmenistan’s money, which is under Niyazov’s effective control, with the long-term interest of Germany in promoting stability in Central Asia,” it said.

A spokesman for the European Commission said: “It is important to improve transparency in energy markets.” EU leaders agreed last month to push ahead with a common European energy policy to ensure security of supplies, particularly from Russia and Central Asia. The EU leaders decided to combine forces after Gazprom cut off gas supplies to the Ukraine. One senior Commission official said at the time: “Russia has got its jackboot on Europe’s gas pipe.”

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