Gazprom

One of the greatest mistakes in the analysis of what is happening in Ukraine is the view of Russia as a one man dictatorship. That is clearly not the case. Moscow is a complex political society with numerous powerful figures. They, rather than Russia’s passive democracy, determine who is in charge. Vladimir Putin has been a strong leader but his power is not absolute. The eternal truth is that all leaders lose power in the end and very few go voluntarily.

After nearly 15 years in office as President or Prime Minister he has already exceeded the normal lifespan of leadership. Actuarially he is living on borrowed time and is dependent on continued success. In the current situation the line between success and failure is very narrow and energy issues are at the heart of the judgment. 

The dispute over Ukraine has moved into a diplomatic phase and for the moment at least the prospect of a Russian advance into eastern Ukraine has receded. The consequences of what happened in the Crimea, however, continue to shape European policy making. The invasion provided a sharp reminder of Europe’s reliance on Russian gas – a degree of dependence which the EU will now reduce even if a settlement is agreed by the diplomats. It is quite possible that within two or three years European gas imports from Russia could be halved. Russia would be reduced to being one supplier among many in a world where gas-to-gas competition inexorably reduces prices. 

The rumours that Vladimir Putin is about to replace Aleksey Miller as the chief executive of Gazprom continue to swirl around the markets across Europe. As usual it is hard to know what is true and what is dreamt up by Mr Miller’s enemies. Removing Mr Miller would not, however, solve Gazprom’s problems. What the company really needs is a new strategy. What should it be. ? 

Pipeline will be laid on the bed of the Black Sea

Gazprom has been putting the final investment agreements in place for the South Stream project, clearing the way for construction of the 63bn cubic metres a year pipeline to Europe to begin next month. Never mind that demand for Russian gas in Europe is falling, or the $19bn cost of South Stream. The pipeline will help free Gazprom from dependence on Ukrainian transit pipelines and improve European energy security.

Gazprom and its foreign partners took a final investment decision on the 900km offshore section of South Stream at a meeting in Milan late on Wednesday. The pipeline will be laid on the bed of the Black Sea and will link southern Russia with the coast of Bulgaria.

 

A tanker is filled at a Gazprom refinery. Getty

Could the conflict between Gazprom and the European Union become the antitrust case of the decade?

The answer is yes and the argument is spelt out in an excellent paper just published by the Centre for European Policy Studies.

The case could not only make legal history and provide a very timely reminder that the EU is alive and kicking, it could also transform the international gas market, pushing on the fall in prices already underway and undermining to the point of extinction the linkage between the prices of crude oil and natural gas.