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    Monopoly Under Fire



Attacked simultaneously in Europe and on the domestic front, Russia's gas giant Gazprom has found itself in a precarious, if not desperate, situation.


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Natural Gas & LNG News, News By Country, Russia

Monopoly Under Fire

The European Commission was motivated ‘mainly by the hard economic situation in the Euro zone’ when it launched an antitrust probe into activities of Gazprom. This is what Vladimir Putin said at his press conference in Vladivostok after the APEC summit. Perhaps he believes that the Europeans would like to rejuvenate their economy by destroying Gazprom’s profit generation chain from wellhead to the end user’s kitchen—or by forcing the Russian giant to make a discount on contract prices.

CEO of Gazprom Alexey Miller reacted to the European attack on his company’s domineering attitude in his usual manner. He repeated his old promise to export as much gas to Asia in a nearest future’ as Gazprom exports to Europe. And since the volume of gas production in Russia has not been increasing for a few years, it could mean a threat to cut down the export flow to the traditional markets.

After all, even if Gazprom by some miracle starts supplying annually 68 billion cubic meters of gas to China, as Putin pledged some time ago, it will be less than the European sales of Gazprom, which fluctuate around 150 billion cubic meters. To carry out his promise, Miller will have to decrease deliveries to Europe to at least half of the current amount.

It sounded like intimidation, and it was not the first warning of the same kind. In September 2009, when Putin chaired a conference in Salekhard, Russian government officials told guests from Western companies that Gazprom would shut down the pipelines, liquefy all its gas and sell it to the United States unless the Europeans accepted commercial terms of the Russian monopoly. Now, when the EC is investigating conspicuous manners of the state-controlled company, Miller responds in his traditional way even though the threats are empty and even ridiculous.

It was a perfect timing for the EC investigators. Gazprom is in dire straits—and not only because its production and exports are shrinking. Officials in the Russian government have begun criticizing the company. In started a few months ago when Sergei Shmatko, who was then the minister of energy, suggested Gazprom could be restructured and dismantled to encourage competition on the gas market. Now the Ministry of Economic Development is calling for stricter control over Gazprom’s investment programs and budgets and refers to the corporate management as ‘inefficient.’

Attacked simultaneously in Europe and on the domestic front, the gas giant has found itself in a precarious, if not desperate, situation. The Russian president will have to make some strategic decisions about the company’s destiny (or about the critics) if he wants his pet monopoly to remain in business.

Mikhail Krutikhin, RusEnergy

RusEnergy is an independent privately-run company established in 2000 by a group of Russian experts with a long experience in consulting and publishing business. Based in Moscow, it specializes in monitoring, analysis and consulting on oil and gas industry of Russia, Central Asia, Azerbaijan and Ukraine.