The Kremlin’s political use of its growing power as a gas exporter should serve as a wake-up call for a Europe that is growing steadily more dependent on energy imports from Russia, according to George Soros, the billionaire investor. “Russia is in the driving seat,” he said.

Some of Russia’s neighbouring states from the former Soviet Union claim that the Kremlin is using energy supply as a political weapon against those countries that have opted to shift towards the West and away from Moscow’s sphere of influence.

Mr Soros said the window of opportunity may be closed for Russia to reform its energy markets and bring to an end the monopoly of the Gazprom energy group, as some international observers and officials have advocated.

Sir Richard Branson, the head of Virgin Group, sounded a warning that any conflict with Iran over its nuclear programmes could push oil prices above $100 a barrel and trigger “the biggest recession we have ever seen”. He called for urgent investment in alternative energy sources.

EU rejects Microsoft peace offer

Tensions between Microsoft and the European Commission over the software giant’s alleged anti-competitive practices escalated as an olive branch from the US company was rejected by Neelie Kroes, the European Competition Commissioner.

Brussels had threatened to fine Microsoft after the Commission found that the company had illegally exploited its dominant position in the market. Yesterday Brad Smith, Microsoft’s chief counsel, offered to give rivals access to the source code for the Windows operating systems.

However, speaking in Davos, Ms Kroes was dismissive, saying: “Normally speaking, the source code is not the ultimate documentation of anything, which is precisely the reason why programmers are required to provide comprehensive documentation to go along with their source code.”

She added: “It was a surprise that they decided to disclose the source code.”

Backing for next Fed Chairman

Ben Bernanke, the White House adviser due to take over as Chairman of the US Federal Reserve from Alan Greenspan on Wednesday, was well-placed to handle any test from financial markets, Tim Adams, the US Treasury Under-Secretary said yesterday. Aiming to reassure investors nervous about the handover, he said: “I know [Mr Bernanke] well. He is quite competent, quite capable, and he will immediately capture the confidence and trust of the markets.”

China promises liberalisation

China has pledged to liberalise its interest rate and foreign exchange policy further as part of wider economic reform — but said that the process would be gradual. Zhou Xiaochuan, the governor of the People’s Bank of China, said that Beijing should accelerate reforms in its pension, medical and educational systems to reduce its unusually high savings rate and encourage people to spend overseas.

“We will maintain the economic policy [that is] prudent . . . We will have decontrol of interest rates and foreign exchange,” Mr Zhou said.

China devalued the yuan by 2.1 per cent against the dollar last year, and swapped an 11-year-old dollar peg for a managed float that lets the currency rise or fall by up to 0.3 per cent a day. But Beijing is under intense international pressure, especially from the United States, to go further.

Asked whether China would widen the band, Mr Zhou said: “You know, Chinese economic reforms are gradual.”