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Eric Reguly on Gazprom

Eric Reguly of Canada’s Globe and Mail has a great blog post up about Gazprom, arguing that “A deal with Gazprom, in effect, is a deal with the Kremlin. There may be nothing wrong with that. But there is something wrong with allowing one company, whether it’s Russian, American or Tahitian, from gaining so much influence over one market.” Look out for those Tahitians – they might just corner the black pearl market in French Polynesia. Check out Reguly’s article after the jump.

From the Globe and Mail blog:

Gazprom’s plan for controlEric Reguly, today at 10:30 AM ESTGazprom cherishes control. It is Russia’s natural gas monopoly, the world’s largest producer of gas and has the biggest pipeline network. It is also the top supplier of gas to the European Union. With the flick of a switch, Gazprom could turn out the lights in more than a dozen European countries, which depend on Russia for anywhere from 40 per cent 100 per cent of their imported gas (Europe produces only a small amount of the gas it consumes).If that weren’t political and economic power enough, Gazprom wants more. Its plan, apparently, is to control the entire value chain, from wellhead and pipeline to power plants and distribution. How do we know? Because that is exactly what is happening. At the World Energy Congress in Rome this week, Fulvio Conti, the CEO of Enel, the Italian energy provider and Europe’s third-biggest power company, said he has offered “small” stake in Italian power plants to Gazprom. Conti said the offering was made during a meeting with Alexander Medvedev, Gazprom’s deputy CEO.Meanwhile, another Italian energy giant, Eni, the world’s sixth-largest oil company, has formed a partnership with Gazprom to build a new gas pipeline under the Black Sea to bring gas from Russia to markets in southern Europe. In Germany, Gazprom plans to build two electricity-generating plants with E.On, the big electric company.Gazprom’s expanding reach in Europe seems at odds with official and unofficial European energy policy. Last month the European Commission porposed separating gas producers from gas distributors, an idea apparently aimed at clipping Gazprom’s wings in Europe. Not surpringly, Gazprom is fighting the proposal. European politicans and enegy CEOs routinely talk about the threat to “energy security” and the need for energy competition and diversity of supply.Yet at the same time some of Europe’s biggest energy companies, presumably with the backing of their sponsor governments and energy ministers, are rushing to do deals with Gazprom even though Gazprom’s inner workings are hardly transparent. The company is about 50 per cent owned by Russian state agencies and companies. A deal with Gazprom, in effect, is a deal with the Kremlin. There may be nothing wrong with that. But there is something wrong with allowing one company, whether it’s Russian, American or Tahitian, from gaining so much influence over one market.