The impact of a possible entry by Russian energy giant Gazprom into the local electricity and natural gas market is hard to assess even for Greek officials.
The company’s interest in this country, as recently revealed by Russian newspaper Vedomosti, will be expressed through local firm Prometheus Gas, over which it has 50 percent control. The Russians’ move will regard the acquisition of additional energy units in Greece. This report, along with the rumored intention by Gazprom to buy out the stake of the Kopelouzos group in Prometheus Gas, has created some turbulence in the local energy market.
“This possibility creates a totally new landscape. It is no small matter to have your supplier as a competitor in your own market,” said a top official in the energy sector.
The French energy market and Gaz de France (GdF), suffered a similar shock last month when Gazprom’s vice president, Alexander Medvedev, stated the company’s intention to sidestep GdF and supply industrial customers in France by itself.
Generally Europe, which is the biggest consumer of Gazprom’s natural gas, was also shocked last month by another report by Vedomosti that revealed the Russian firm’s plans to increase the price of natural gas it sells to Europe by 14 percent in 2007, compared to 2006 prices.
This is an escalation of the aggressive policy by the Kremlin and by Gazprom which has been under way since the start of the year, aimed at strengthening the role of Russia as an energy supplier on the worldwide market. The Russian-Ukranian tussle early in 2006 proved more than just a two-party affair; it was the first move in an aggressive strategy that is gradually being implemented, sending shock waves through the international energy scene and warnings about market restructuring that cannot be predicted. Europe receives the greatest pressure from this policy by the Kremlin, as the continent’s natural gas needs are 35 percent covered by Russia. This pressure is being expressed via a series of moves by the Russian side for the full control of sources and routes for Europe’s gas supply.
Russia is using every means at its disposal to avert any European plans for alternative suppliers. The major power companies in Europe are still trying to recover from the insecurity created by last August’s announcement of an agreement between Gazprom and Algeria’s Sonatrach, the second-biggest supplier of liquified gas, for a joint production and processing of reserves.
A month later this insecurity rose with the memorandum signed by Gazprom and Egypt for Russian-Egyptian cooperation in natural gas. Egypt exports natural gas to Jordan via a pipeline that stretches to Turkey, through which it could reach Europe with the pipeline system of Southern Europe that includes the Turkey-Greece-Italy pipeline.
Gazprom has already acquired privileged trade conditions with Turkmenistan, while it is trying to gain similar terms with Azerbaijan, whose rich reserves are expected to reach the global market after 2010.
Russia keeps tightening its grip on the European Union, which in this difficult time for alternative suppliers is planning its line of defense. In this game of pressure, a strong asset for the Russian side is the extension of its supply contracts with European companies. The price increases, combined with the stated intention of investing in the retail market (for acquiring natural gas companies in Western Europe), pave the way for Europe’s concessions against Russia’s long-term geostrategic plans. The EU response is expected by year’s end with great interest. The operation framework of the gas market is being revised to contain the Russian threat.
Although Greece is a very small market, it is at the center of developments due to its connection with Turkey and Italy through a pipeline with a capacity for 11.5 billion cubic meters of gas per year. Gazprom has stated its interest in filling the pipeline with gas and has even offered to undertake the construction costs.
The Russian company’s intention to enter the Greek market is basically part of pressure on the Greek side to allocate use of the pipeline, given its strategic importance for Russia. Moscow reportedly associates its demand for the pipeline’s use with ongoing negotiations for the extension of the supply contract with the Public Gas Corporation (DEPA) which ends in 2016. This intention to enter the market via Prometheus Gas seems part of Gazprom’s tactic of pressure. The implied threat is linked to the possibility of direct supply of the market with gas that could be much cheaper than that provided by DEPA. The size of the local market proves that it is not part of any commercial strategy.
The Russian tactics in this negotiation are so tough that even non-renewal of the contract is possible. “This is unlikely though, as these deals are between states,” said a government source, adding, “What is certain is that the Russians are playing hardball.”
(Kathimerini, 4/12/06)