Thursday, August 29, 2013

Window on Eurasia: Gazprom Losing Its Markets and Its Clout in Europe and CIS

Paul Goble

            Staunton, August 29 – Gazprom, one of Moscow’s main sources of leverage in Europe and the Commonwealth of Independent States, is losing its positions in both places, something that has domestic consequences as well because the company is one of the largest taxpayers of the Russian Federation, according to a Moscow analyst.

            In an article in yesterday’s “Novyye izvestiya,” Sergey Putilov says that European regulators are preparing to invoke anti-monopoly rules against the Russian gas giant if talks break down and that Ukraine because of its problems with Moscowis cutting back its purchases of Gazprom gas as well (

            Earlier, Putilov notes, Gazprom was able to maintain profit levels by increasing prices domestically. But now, he says, its ability to do so is being “restrained” by the government which is trying not to do anything that might provoke “a social explosion.”  As a result, experts suggests, Gazprom is likely to turn its attention to Asian markets.

            Moscow’s reaction to the European moves is now political, with Foreign Minister Sergey Lavrov saying on Tuesday that the Russian government is “concerned” by the anti-monopoly investigation begun by the European Commission and thinks it is unjustified given Russia’s “weighty contribution to the strengthening of the energy security of the European continent.”

            Moreover, Moscow’s chief diplomat continued, that the formulas the Europeans were using were inappropriate for Russia and that if the EU adopts sanctions against Gazprom, then “the company will find it difficult to work in markets which openly discriminate against it.”

            Lavrov’s words show just how worried Moscow is about this situation, according to Aleksandr Pasechnik, chief analyst of the National Energy Security Foundation. But the Europeans are unlikely to take his words seriously because they increasingly have access to other sources of gas.

            Moreover, Moscow’s heavy-handed approach toward Ukraine has led many in Europe to conclude that they cannot afford to put themselves in a position where the Russian government either directly or via Gazprom will be able hold the continent hostage.

            Meanwhile, Putilov continues, Gazprom’s sales to Ukraine and Moldova have fallen significantly over the past year, and its sales to Belarus have been flat. World prices are falling That has resulted in fewer profits and consequently fewer taxes paid to the Russian government. With domestic price increases excluded, he says, Gazprom will be looking to boost sales to Asia.

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