No need for Europe to ‘face up’ to Gazprom

Gazprom does not pose a threat to competition or to supplies.

In her article “Dream of the mundane, not pipes” (EuropeanVoice.com, 11 March), Iana Dreyer of the European Centre for International Political Economy made a number of claims relating to Gazprom’s European operations to which I would like to respond.

The crux of Dreyer’s article is that in order to improve the functioning of the European internal market, large gas monopolies must be tackled head-on and that the EU’s laws on unbundling must be fully implemented. The author argues that in order to do this, the European Commission will have “to face up to Gazprom”.

This analysis is misleading at best and, at worst, it paints a distorted picture of the European gas landscape.

First, as with any other company operating in the EU, Gazprom will be subject to the new unbundling regulations, which we will fully respect.

Second, there is no denying that for historical and geographical reasons, Gazprom is the main supplier of gas for certain European countries. But this is by no means an anomaly in the oil and gas business, where the vast majority of Europe’s supply comes from imports from a very limited number of third countries and suppliers.

Having a significant share of the upstream market must not be confused with having or abusing a dominant market position, as understood in EU competition law. That Gazprom’s share of the total EU gas market is 25% makes the monopoly claim groundless. In some European countries where Gazprom’s market share exceeds 25%, our customers are protected against the possible abuse of our market position by the formula used to set prices.

Third, it is true that in specific cases, we have chosen to be a co-investor in gas distribution infrastructure systems. It is a mystery to me why this should be anti-competitive. The opposite is true. Our downstream investments have brought much welcomed competition to formerly closed markets to the benefit of EU consumers. And our market shares there are still very limited and will not go much beyond 10% in the foreseeable future.

Again, this hardly constitutes a monopolistic threat.

Dreyer also writes that many European countries were affected when “Gazprom stopped supplies of gas to Ukraine in January 2009”. The reality is that last winter we were confronted with a situation where Ukraine ceased paying for Russian gas supplies and barred Russian export gas from reaching European customers.

For many decades, and even through the darkest times of the Cold War, Gazprom has been a reliable supplier of gas to Europe. We have always respected our contracts. Interruptions of supply are in neither our short-term nor long-term interest. They affect both our revenues and our customers’ trust. It would hence be foolish for us to provoke such a crisis.

Today, Gazprom, along with its EU partners, is pushing forward projects that will clearly increase Europe’s energy security, by diversifying supply routes and building more gas storage facilities closer to our end-consumers.

Through construction of the Nord Stream and South Stream pipelines we will be able to supply Europe with a combined total of 118 billion cubic metres of gas per year – additional capacity that we hope will be welcomed as a means of helping the EU meet its future demand for natural gas.

 

From:

Sergei Kupriyanov

Spokesman

OAO Gazprom

Moscow