Putin defies EU with threat to Georgia

Russia's president, Vladimir Putin, gave no ground to EU leaders yesterday as he used a summit to defend Moscow's treatment of foreign oil firms and warned Georgia that its actions could prompt "bloodshed".

Challenged over Russia's human rights and the pressure it deploys on European oil companies, Mr Putin said he agreed with the EU over access to Russia's markets and denied standing in the way of European firms.

But Mr Putin heightened the rhetoric in his dispute with Georgia, arguing that the southern neighbour was stirring regional conflict and what he wanted was "that bloodshed will be avoided".

European heads of government sought to close ranks on energy security and human rights in the run-up to last night's dinner with Mr Putin at an EU summit in Finland. Germany and Poland, two countries that have clashed on energy policy with Russia, united to demand that the Kremlin stops discriminating against European firms. However, France injected a discordant note by arguing that morality and economics should not be mixed

Angela Merkel, the German Chancellor, said: "We offer security in contracts and we expect the same from Russia, namely also legal security in contracts and access to the Russian market."

The Polish president, Lech Kaczynski, followed a similar line, arguing: "European investments in Russia have to be as secure as Polish investments in Finland or vice-versa."

The show of unity was significant because Poland has previously attacked Germany's co-operation with Russia over a pipeline under the Baltic.

The same view was voiced by Tony Blair who said: "If we are going to have this two-way trade with Russia, there has to be clear rules obeyed on both sides. It is important that if we have a business relationship based on energy, it is a business relationship not a political relationship."

However, Mr Putin gave away nothing of substance, reaffirming that Moscow will not ratify an energy charter that would liberalise the market in Russia.

"We are not against the principles that are included in the charter but we believe certain provisions of the charter should be defined better," he said.

Heavily dependent on Russia for fuel and with demand rising, European governments have been struggling to find a way to deal with Mr Putin who has not been afraid to use his country's status as the world's largest fuel exporter as an economic weapon.

Earlier this year, natural gas to Ukraine was shut off. Since then, the Russian authorities have applied acute pressure on Shell, threatening its Sakhalin-2 plant on environmental grounds, and shutting foreign capital out of development of the Shtokman gas field.

Georgia's brief arrest last month of four Russian officers it accused of spying prompted Russia to impose a postal and transport blockade on its southern neighbour. It has also launched a crackdown on Georgian-run businesses and Georgians living in Russia, deporting hundreds of people it says are in the country illegally.

Russia now sends 60 per cent of its exports to the EU, resulting in a trade surplus of ¤50bn (£33bn) or more a year. For the EU, Russia is the single biggest oil and gas supplier, accounting for one-fifth of total EU energy.