Gazprom’s Little Gift

Gazprom has adjusted gas prices for five European companies that it has long-term contracts with.  These companies, which include France’s GDF Suez and Germany’s Wingas, have been tight-lipped about actual figures, with only Sinergie Italiane commenting thus far, mysteriously revealing that savings will be ‘significant’.  Although what might be ‘significant‘ for a large European energy company is small beans for Gazprom the Giant.  RussiaToday is guessing at price reductions of 10-15%, or about $1.2 billion.

Bearing in mind that this amount is about 3.2% of Gazprom’s total spending for 2011, and that Gazprom’s profits for the first half of 2011 were over $25 billion, we’re talking about a relatively small drop in an ocean of gas.  And given that the concession has been made in exchange for continued loyalty from a valued customer (the EU buys about a quarter of its gas from Russia), and continued demand in a currently harsh market, does this really look like a shift away from the status quo?  Until Gazprom abandons contracts linked to spot price, it seems premature to herald this as evidence of a weakened position.

We might evaluate Vladimir Putin’s current position in the same way: a concession for Putin does not have anything like the same weight as a concession for an opposition politician.  Putin’s rhetoric is growing increasingly petulant this week in response to insults and criticism from all sides, and he has both refused to meet and attempted to meet with various opposition members – on first glance, it may look as though he’s getting scared.  But one only has to look at the current list of approved presidential candidates to realise that Putin’s position remains incredibly strong, and that the new surge of ‘Decembrist’ unrest has to be only the tip of an iceberg if it’s to succeed.  As Putin pointed out last month, he doesn’t actually need election fraud, at this stage, in order to win a majority fair and square.  And until Governors become democratically elected, as the anti-Kremlin protesters insist they should be, a representational Kremlin is not on the cards.

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