As Russia edges towards agreement on energy principles with Group of Eight leaders, the European Union is offering several rewards: cash, technology and access to a huge consumer market that is hungry for oil and gas.

Moscow has resisted calls to ratify an international treaty that promotes price transparency and free energy transit across the Eurasian continent, but is likely to endorse many of those ideas at the G8 summit of industrialised nations on July 15-17.

So what will Moscow get in return for a step that could lead someday to a loosening of its monopoly on pipelines and clearer rules on investment in its prized energy sector?

"The 'carrot' is a big market... for their natural resources," said one senior EU source. "The reliability of the market is extremely important for them."

Since Russia's January pricing dispute with Ukraine disrupted gas supplies to Europe, the 25-nation EU has intensified its search for new sources of energy in an attempt to protect the security of its supply.

But Moscow, which provides 25 per cent of the EU's gas, has repeatedly countered that it needs security of demand. That is something the EU, even as it looks to diversify, can offer.

"They want security of demand, we want security of supply," EU Trade Commissioner Peter Mandelson told Reuters.

The EU, with a population of more than 450 million people, consumed 1.7 billion tonnes of oil equivalent from different sources in 2003, most of which was oil and gas, according to the executive European Commission.

Mr Mandelson said Russia and the EU had the makings of a good partnership and would both benefit from agreed rules governing trade in energy products. The Commission last week dangled the carrot of an eventual free trade agreement if Moscow cooperates.

Russian President Vladimir Putin has said the Kremlin would only allow Europe greater access to its energy sector if Russian companies are allowed into European markets in exchange.

Factbox - What is the G8?

The G8 group of industrialised nations meets on Saturday at a summit in the Russian city of St Petersburg.

Here are some key facts on G8 and who is likely to attend.

What is the G8?

¤ The G8 Group is an unofficial forum of the heads of the leading industrialised democracies: Russia, the United States, Britain, France, Japan, Germany, Canada and Italy.

¤ The member states account for 49 per cent of global exports, 51 per cent of industrial output, and 49 per cent of assets in the International Monetary Fund.

¤ The first summit in France in 1975 was called to settle a dispute over currencies, but G7 meetings were soon expanded into an opportunity for world leaders to discuss broad economic policy matters. Russia was admitted to the group at the Denver summit in 1997.

¤ There is a ninth member: the European Union. At the leaders' level, the EU is represented by both the President of the European Commission and the rotating President of the European Council.

What does the group do?

¤ The G8 meets to deal with the major economic and political issues facing members' domestic societies and the international community as a whole.

¤ Questions of macroeconomic management, international trade, and relations with developing countries, East-West economic relations, energy, and terrorism have also been of recurrent concern.

¤ More recently, employment and the information highway, transnational issues such as the environment, crime and drugs, and a host of political-security issues ranging from human rights through regional security to arms control have been discussed.

¤ Participants - The heads of state or government of the G8 countries will take part. Their counterparts from China, India, South Africa, Brazil, Mexico and Kazakhstan have also been invited.

Sources: Reuters/G8 Information Centre.