Labour kicks off energy review as Russia darkens the outlook

The Government is set to launch its long-awaited energy review this month. Officials at the Department of Trade and Industry (DTI) have pencilled in 16 January for the launch of the public consultation, which is expected to last around three months, but the date could slip towards the end of the month.

Tony Blair announced the broad terms of reference for the review in November. Ministers want it completed by the middle of this year.

The dispute over gas supplies between Russia and Ukraine, which threatened supplies to the rest of Europe last week, has not accelerated the timetable. But DTI officials concede the scare will focus minds on the review, which will decide how to replace Britain's ageing nuclear reactors and the old and dirty coal-fired power stations which are being shut down.

Russian officials also delayed an important meeting with their counterparts from the EU last month over how to ensure Russian gas exports reach Europe.

This was part of the round of talks initiated last year by Britain, which held the EU presidency at the time, to foster closer ties between Russia and the EU on energy issues. The first Permanent Partnership Council - the standard forum for ministers to discuss EU-Russia affairs - was held on the subject in October.

But some meetings of the energy working groups of EU and Russian officials working beside the council have been delayed. One of the meetings, which usually take place every two months, was supposed to happen in December but did not because the Russians could not agree a time.

One UK government source blamed "Russian bureaucracy" while a senior EU official admitted that the Russians were only "more or less co-operative". "They have their position, we have ours," he said.

Russia, which now holds the G8 presidency, has not set a new date for the working group to meet. The continuing delay will not ease fears about the sincerity of the country's promises that it will maintain supplies of gas to Europe and not hold it to ransom over energy. A new row also appeared to be brewing at the end of last week between Russian gas monopoly Gazprom and Bulgaria over higher gas prices.

The EU official conceded that the row between Russia and Ukraine was embarrassing for UK and EU ministers, who have been highlighting the need for closer ties with Russia over energy issues.

Britain's Energy minister, Malcolm Wicks, told a delegation of Western oil executives in Moscow in September: "Reliable energy supplies for Europe for decades to come are dependent on strong, durable relations with Russia."

A report published in October on the EU-Russia Energy Dialogue also praised it for "strengthening the security of energy supplies" and for helping to solve a "number of important misunderstandings".

Ian Whitlock, a partner of the energy practice at accountants Ernst & Young, said: "The dispute between Russia and Ukraine is timely, with the energy review in the UK coming up, to get people thinking about energy supplies."

If nuclear reactors and coal-fired power stations are allowed to close, around 80 per cent of Britain's electricity will be generated from gas, most of it coming from mainland Europe.

Proponents of nuclear power claim that the row between Russia and Ukraine underlined the need for more nuclear generation, while a former environment minister, Michael Meacher, said that renewable forms of energy, such as wind power, have not been given a chance to fill the gap.