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Gazprom Plays Smashmouth with Serbia

Craig Pirrong has another great article today about Gazprom’s move to take over Serbia’s state energy monopoly, NIS. The good professor writes the following: “To make the deal look a little less like an abject surrender, Gazprom has also dangled the prospect of giving Serbia a stake in a future gas venture. Word of advice, guys–DON’T BELIEVE IT, and DON’T TAKE IT. Gazprom is the master of what Bob Amsterdam calls “premature contractualization.” That is, announcing deals just in time to forestall projects that are adverse to Gazprom’s interest, and then fading the deal when the threatening competing projects are shelved in response to the Gazprom announcement. Gazprom will whisper sweet promises in anybody’s ear to get what they want, and then renege when it suits them. (Nigeria–you should take note of this, as Gazprom has been wooing you too.)” Not to be overly self-referential, but it is important to highlight with regard to the Kremlin’s siege of Serbia that the practice of premature contractualization also works to prevent the entrance into the Serbian energy sector of other competing parties. The nearly extortionate quality of Gazprom’s tactics assures that when there is a real deal, the target party does not have an appropriate amount of time to assess the real economic and commercial merits, rather than just the political ones. The speed with which we are seeing Gazprom move on NIS leads one to consider the corrupting influence both over political issues (such as Kosovo independence) and the pure economics. Exactly who, it may be fair to ask, is Gazprom paying in order to pick these assets up so cheaply and quickly?