If, a year ago, Russia's OAO Gazprom had threatened to turn off the taps to Ukraine and create an OPEC-style gas alliance, it would have provoked panic in Western capitals. But now, with oil prices at their lowest in four years, Moscow is having trouble getting the West's attention.
The global economic slowdown has cut demand for oil and gas the world over, curbing the strength of big energy companies that once seemed unassailable. Gazprom, the gas supplier long feared in Europe as an all-powerful monolith, is heavily in debt and hurting from a steep decline in energy prices.
So a meeting of gas producers in Moscow on Tuesday that might have rung alarm bells in the past invited little Western comment. Energy ministers from 12 countries decided to turn what had been an informal club into a permanent organization, to be named the Forum of Gas Exporting Countries. Delegates adopted a charter and agreed the group would be based in the Qatari capital of Doha -- a defeat for Russian Prime Minister Vladimir Putin, who had lobbied for St. Petersburg, his hometown.
Energy ministers at the Moscow meeting said their aim was to stabilize prices and monitor the gas market. Some gas-consuming countries fear the group is seeking to model itself on the Organization of Petroleum Exporting Countries, and would, like OPEC, try to manipulate prices by imposing production quotas.
But with most natural gas sold under long-term supply contracts that are indexed to the price of oil, analysts said the new organization won't have OPEC's clout. A report commissioned by the gas forum and released Tuesday said it would be impossible to abandon the current crude-based pricing mechanism, though other "non-crude indicators" could be used in the future.
The new group was formed as OPEC's power appears to be waning. Last week, the organization made its biggest production cut yet -- trimming by 2.2 million barrels of oil a day -- yet the move failed to stop the slide in the price of crude. Neither did an announcement by Russia that it might consider joining OPEC.
The comparisons drawn between the gas forum and OPEC come as Europe is already jittery about its reliance on Russia, which supplies a quarter of the Continent's gas. Those worries were reinforced this week when Gazprom threatened to cut off gas supplies to Ukraine over an unpaid debt, and warned European customers that the dispute could jeopardize their deliveries, most of which pass through Ukraine. The warning evoked memories of January 2006, when Gazprom turned off the tap to Ukraine, disrupting gas supplies in Western Europe.
Gazprom says Ukraine owes it more than $2 billion for gas supplied in November and December, and is refusing to sign a new supply contract for 2009 until the bill is settled. Ukrainian state oil and gas company Naftogaz Ukrainy denies it owes anything, saying that under an earlier agreement with Gazprom it's allowed to pay for gas a month in arrears.
A Naftogaz official said he expected a breakthrough in the talks with Gazprom by year end, and possibly as soon as Wednesday. The head of Naftogaz, Oleg Dubina, is scheduled to meet Gazprom Chief Executive Alexei Miller in Moscow on Wednesday.
Even if the dispute isn't solved, there's little likelihood of supply problems this time. Ukraine has reassured the European Union that transit shipments of gas across its territory won't be affected. Domestic supplies are also unlikely to be hit: Ukraine has been hoarding stockpiles of gas in underground storage, enough to cover domestic demand till the end of the winter heating season, officials say.
Analysts say it wouldn't be in Russia's interests to halt exports to Europe. Russia has been hit hard by the global financial crisis: Falling oil prices have decimated state revenues, and the government has been forced to spend billions of dollars from its oil windfall fund to shore up the weakening ruble and bail out domestic industry.
Gazprom has also been hit. Last summer, Mr. Miller boasted it would be the world's biggest company by market value within seven to ten years, with a capitalization of $1 trillion. At the time, Gazprom's market cap was $360 billion. Now it's around a quarter of that.
Worse lies ahead. Natural gas prices tend to follow oil prices with a six- to nine-month lag: With crude down more than $100 since reaching a record high of $147 a barrel in July, gas prices are expected to fall steeply next year. That will mean a sharp decline in Gazprom's export revenues from mid-2009.
Still, Mr. Putin, addressing the gas exporters' forum, warned that the price of gas would inevitably rise again in coming years. Producing gas fields are in decline, he said, and most untapped resources are in remote areas. Russia will need to invest billions of dollars to develop new fields in places like the Yamal Peninsula and the Barents Sea, which lack basic infrastructure and will need to be connected by pipeline to areas where gas is consumed.
Gazprom said Tuesday its board had approved investments for 2009 of $32.5 billion, up 12% from this year's levels.
"That means that despite the global financial crisis . . . the era of cheap energy, including cheap gas, is ending," Mr. Putin said.