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View Full Version : Falling Gas Prices Deny Russia a Lever of Power


bravo22b
05-16-2009, 06:02
http://www.nytimes.com/2009/05/16/world/europe/16gazprom.html?hp

MOSCOW — As energy markets shrink, the same tactics that the Kremlin used to build Gazprom, the giant energy company, into a fearsome economic and political power that could restore Russian influence in the world are now backfiring, slashing both its profits and its influence.

Throughout his eight years as president of Russia, Vladimir V. Putin pursued the strategic goal of dominating natural gas supplies to Europe and the pipelines that deliver them. His success was underscored in January, when for the second time in three years a pricing dispute with Ukraine disrupted the flow of natural gas, leaving hundreds of thousands in Eastern Europe shivering in the deep winter cold.

But in his zeal to monopolize gas supplies, Mr. Putin, who is now Russia’s prime minister, committed Gazprom to long-term contracts with Central Asian countries for gas at a cost far in excess of current world prices. Now that the world economic crisis has sharply curtailed demand for gas, Gazprom is saddled with a glut of expensive Central Asian supplies that it is forced to sell at a loss.

In a painful twist, the company also finds itself forced to close its own wells in Russia, which produce gas for a fraction of the cost of that from Central Asia, in order to balance its supplies with declining world demand. In effect, a strategy that made business and political sense in a time of high and seemingly ever rising prices is threatening to create years of losses and declining influence, if energy prices fail to rebound.

It really breaks my heart to hear that the Russians are getting bit in the ass.:boohoo

Another former Soviet supplier, meanwhile, has accused Russia of sabotaging a pipeline to shut down deliveries of expensive gas.

On the night of April 9, a portion of the pipeline carrying Central Asian gas to Russia exploded in Turkmenistan, temporarily cutting off shipments. Turkmenistan’s Foreign Ministry issued a statement blaming Gazprom for closing the valve leading to Russia, preventing gas from flowing north and creating overpressure in the pipe. News reports are sketchy, but as of May 1 the pipeline was still out of commission.

Somehow, I doubt this will be an isolated incident. There seems to be a lot of pipeline "accidents" in the Russian gas business.