07.06.2006
In Defense of Gazprom

On January 1, 2005, Europeans came to realize just how important to them Gazprom has become.

On that day, a dispute with Ukraine over the price it pays for gas ended up briefly interrupting supplies to Europe, which depends on Russia for a quarter of its gas.

The incident tarnished Russia’s hard-won reputation as a reliable energy supplier, built up during more than two decades of uninterrupted supplies.

It also pushed energy security to the top of the EU’s agenda.

Suspicions that Russia had decided to use its energy reserves as a foreign policy tool were then bolstered by veiled threats by Gazprom’s chief executive, Alexei Miller, and the Russian president Vladimir Putin.

Both suggested that if Europe blocked Gazprom’s expansion plans, they would shift their investment focus to new markets in Asia and the US instead. The incidents prompted Dick Cheney, US vice-president, to accuse Russia of using its vast energy supplies to blackmail its neighbours.

Alexander Medvedev, Gazprom’s deputy chief executive, thinks the Russian energy giant has been misunderstood by both Cheney and the western media. In an interview with the FT, he said the company’s actions were commercially, not politically motivated.

“The tone of the press is really surprising to me,” he says.

“When Cheney is saying that Russia is using blackmail ... that is nothing to do with our normal business practice.

“I was always educated that western free press is giving the possibility to express different views. We didn’t see it.”

Medvedev says it was Ukraine, not Russia, that had attempted to use blackmail to keep receiving cut-price gas.

“We tried to find a solution with Ukraine till the very end of the year,” he says. “Ukraine left the negotiating table voluntarily three days before the end of the year. They probably believed they could blackmail not only Gazprom but the whole [of] Europe, making them the centre of the universe.”

As for the supposed threats made by Miller to EU ambassadors, Medvedev says his comments were broadly misinterpreted.

Miller was referring to the destination of future supplies, he says – not existing contracts. Analysts have said that Moscow is aiming to play Europe and China, Russia’s largest potential customer, off against each other.

But Medvedev says it simply must make a commercial decision on where to send new gas supplies in the coming decades.

“Obviously we should make our investment decision today for the future supply,” he says. “If Europe says to us: ‘Look guys, we don’t want your gas’, to increase the share of Russian gas beyond a certain limit then we should invest in supply of gas to China.”

The EU has called on Gazprom to open its pipeline network to third parties – both to independent producers and other gas-producing countries such as Kazakhstan or Turkmenistan.

But Medvedev derides the idea of sharing its pipeline network – the longest in the world – as “a pure Communist approach, that it should be divided equally”.

He says there is simply no room in its pipelines to transport other people’s gas if Gazprom is to fulfil its existing contracts.

“Our system is fully planned and managed in accordance, not only with the situation today, but also for the next 20, 25 years of our export portfolio,” he says. “Obviously, we are not intending to be in breach of our contracts because Cheney would like to give access to somebody in central Asia.

“For us, our contracts are like a Holy Bible.”

US has also been pushing for an alternative pipeline that would take Kazakh gas through Azerbaijan to Turkey and into Europe, bypassing Russia altogether.

But Medvedev derides that project as “unrealistic.” Kazakhstan would not have enough gas to supply it and Europe would not have enough demand to justify it, he says. “You could speak about hundreds of projects, but [none] of them will be executed,” he says. “I’m rather sure that without Russian gas, no projects in new supply will fly. For a very simple reason: no gas, no market.”

“Today, due to the absence of the additional markets for this gas in Europe, it is absolutely unrealistic,” he says.

Ajankohtaisiin »