(02-23) 10:24 PST CANBERRA, Australia (AP) —

As Australia expands economic ties with China, the U.S. hopes to gain insight from its Pacific ally on the communist power whose military buildup has drawn increasing American concern.

The message Saturday from the top diplomat in Australia’s new center-left government was that the U.S. should pursue a more positive dialogue with China.

At the close of a daylong series of meetings with Defense Secretary Robert Gates and other U.S. leaders, Australian Foreign Minister Stephen Smith said at a news conference that his nation’s growing trade relationship with China will not hurt its strong and long-standing ties with Washington.

“It can be a win-win,” Smith said, acknowledging that China was discussed. “We can have a very good economic relationship with China, which doesn’t adversely impact upon our relationship with the United States. On the contrary, we encourage the United States to have a good, positive, constructive dialogue with China.”

China’s military commitment and its effect on the Asia-Pacific region have raised concerns among U.S. defense officials. Smith also said he has told Chinese officials they must be more open about the modernization of its military.

Tensions between the U.S. and China have intensified in recent months. Late last year, China refused to allow three U.S. Navy ships to dock in Hong Kong late last year. This past week, China expressed skepticism over whether the Pentagon’s missile firing to bring down a disabled U.S. spy satellite was necessary. The U.S. had criticized Beijing for shooting down a defunct Chinese satellite in 2007.

Deputy Secretary of State John Negroponte told reporters that U.S. officials hope to get some insight from the Australians on China matters. Prime Minister Kevin Rudd is an expert on China.

Gates and Negroponte agreed that Australia’s burgeoning economic ties to China do not present a problem. China has become Australia’s largest trading partner, serving as a booming market for its natural resources.

“I don’t think there’s anything incompatible with developing an economic relationship with China and also managing our bilateral relationship and the alliance,” Negroponte said. “We both have important economic relationships with China.”

Gates added that he does not believe that Australia or any government would “put its fundamental security interests at risk over an economic relationship.”

In recent visits to China, Gates and some of top U.S. military officials have talked optimistically about improved political relations with the communist giant. Little tangible results have been evident, however.

With the spy satellite’s downing, there has been an undercurrent of suspicion that the strike was a thinly disguised test of the Pentagon’s missile defense and anti-satellite technologies. It also could be seen as a bold comeback to China’s shootdown of its weather satellite.

U.S. officials have drawn distinctions between the two strikes. The Pentagon gave other nations notice of its plans and worked to minimize space debris by targeting the satellite as it neared the Earth’s atmosphere. China gave no notice and destroyed its spacecraft further up in orbit, creating more debris that will circle the planet for much longer.

During the news briefing, the Australians did not mention China’s satellite strike, but said they were pleased the U.S. gave them advance notice of its spacecraft shootdown,

“The sharing of that information was … greatly received,” said Smith. “It was also, I think, very valuable in terms of the international community understanding that particular issue.”

Fitzgibbon was more succinct. He turned to Gates and smiled, “Bob, nice shot.”

China and the U.S. are also at odds over a proposal by the Russians and Chinese for a global ban on space arms because it would rule out plans for a U.S. missile interceptor system in the Czech Republic and Poland. It would exempt Chinese and Russian ground-based missiles that can fire into space.

U.S. defense officials have expressed broad concerns about China’s expanding military and called for Beijing to be more open about its intentions as it boosts development of weapons systems.

(02-23) 10:54 PST BUENOS AIRES, Argentina (AP) —

The presidents of Argentina, Brazil and Bolivia failed to resolve a natural gas dispute Saturday, but agreed to study how to divide Bolivian supplies to avoid an energy crunch, an official said.

Bolivian Energy Minister Carlos Villegas said the three leaders amicably discussed ways to divide up limited Bolivian supplies, but reached no immediate solution during talks at Argentine President Cristina Fernandez’s suburban residence.

“We need to assure the overall supply of energy for the long term,” Villegas said after Fernandez met Bolivia’s Evo Morales and Brazil’s Luiz Inacio Lula da Silva.

He said they agreed to create a committee made up of the three energy ministers “that is going study the structural issue of gas supplies in moments of greatest demand.”

He said the ministers would meet in “coming weeks.” The presidents made no public comments upon leaving the talks. But Argentine Foreign Minister Jorge Taiana released a statement confirming the creation of a “coordinating group” of energy ministers that said it will permanently analize “the evolution of the respective energy demands.”

Bolivian officials have assured the two energy-hungry neighbors they can meet needs this year, but growing demand for gas could mean shortages in 2009. Natural gas is a critical energy source for Brazil and Argentina.

Brazil gets about half its natural gas from Bolivia Д between 27 million and 29 million cubic meters daily Д while Argentine generally buys between 3 million and 5 million cubic meters each day.

Bolivian officials say they expect demand from both countries to jump by as much as 7 million cubic meters daily in 2009.

Bolivia’s natural gas industry, suffering from tepid foreign investment following Morales’ 2006 nationalization, will be hard-pressed to match the increase and that has raised fears of shortages.

Argentina last year signed a contract with Bolivia to dramatically expand the amount of gas it will import and the two countries are moving forward on a $1.9 billion pipeline to quadruple the daily capacity of gas exports.

The threat of future energy shortages is a headache especially for Argentina, where bitter cold last winter led to natural gas shortages as Argentines turned up gas heaters.

The country also weathered summer blackouts caused by heavy air conditioner use.

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Associated Press writers Mayra Pertossi in Buenos Aires and Dan Keane in La Paz, Bolivia, contributed to this report.

HIGH wholesale energy prices appear to have claimed their first victim, with junior retailer Energy One prevented from operating and its customers transferred to other retailers.

The National Electricity Market Management Company (NEMMCO) issued Energy One with a suspension notice yesterday afternoon, meaning that from midnight it cannot trade or enter into any transaction on the electricity market until the suspension is lifted.

At that time, Energy One’s customers, of which there are more than 5000 spread across Queensland, NSW, the ACT and Victoria, were to be transferred to alternative retailers.

Energy One, which was formed in 1996 and listed on the stock exchange in January, has also entered into a trading halt on the Australian Securities Exchange. Its shares are valued at 58 after reaching a high of $1.26 in January.

“Following an announcement by the company, normal trading will resume on Monday the 25th of June 2007,” Energy One said in a statement to the market.

The problems facing upstart retailers have been underlined in recent days as energy demand hit a high in NSW where spot prices, which are set half hourly, were close to $10,000 per megawatt hour, and winter records were set in Victoria and South Australia.

Steve Edwell, chairman of the Australian Energy Regulator, said retailers were being squeezed in the middle, forced to absorb high prices but unable to pass them on to consumers.

“If there is a lesson out of this at an early stage, it is that energy markets can be volatile and traders need to have a strong risk mitigation strategy and future hedging in place,” he said. “I expect the reasons and the impacts of the market on this retailer will be assessed closely by us and others. We need to make sure the lights don’t go out for the Energy One customers.”

Gavin Dufty, manager of social policy and research with St Vincent de Paul, said the situation was unprecedented and regulators had to make sure that Energy One’s customers were protected.

“There are so many questions that arise: Will these customers have the same terms and conditions as before? What will their contract be like? These are questions that I think are only being worked through now,” he said. “Will Energy One be the first of many, will all these second-tier retailers start falling?”

Energy One’s customers are largely in the small business area and predominantly in NSW. It has only two customers in Victoria, one in the ACT and about 160 in Queensland.

Under the retailer of last-resort scheme, each energy retailer is required to list another retailer to supply its customers with electricity if it enters a suspension. It is believed Energy Australia could take Energy One’s customers.

Energy One and NEMMCO did not return calls yesterday by BusinessDay.

http://www.energyone.com.au/