Gazprom seeks the status of “exclusive supplier” to European customers [Asiatimes]

By Vladimir Socor

Russian state-controlled companies, Gazprom and Rosneft, mapped out far-reaching expansion programs in bilateral deals with Western companies at the St Petersburg International Economic Forum on June 21-22. Russian President Vladimir Putin coordinated the overall process.

In parallel with mineral exploration and production agreements, Gazprom is pioneering a new type of vertical integration at the expense of European companies and consumers. Under this new concept, Gazprom seeks part-ownership of natural gas-based electrical power plants in Europe, in exchange for gas supplies

from Gazprom’s fields via Gazprom pipelines.

Gazprom seeks the status of “exclusive supplier” of gas to such power plants under these deals, thereby ruling out competition. If this implies (as it seems) price fixing as opposed to market pricing, it follows that European companies acquiescing in such terms would expect to pass on the onerous cost burden to their consumers.

At the St Petersburg Forum, Gazprom advanced discussions on this type of deal with Electricite de France (EDF, signing a memorandum of understanding), Italian ENEL (Ente Nazionale per l’Energia Elettrica), and Danish DONG (Dansk Olie og Naturgas) – national champions majority-owned by their respective governments. The ongoing discussions focus on generating capacities owned by these companies in EU territory outside their home countries.

Under the Gazprom-EDF memorandum, the two companies would jointly acquire existing European gas-based electrical power plants and build new such plants in Europe. The two companies would hold such plants in parity ownership, with Gazprom as exclusive supplier. This concept resembles in broad outline that proposed by Gazprom to German RWE (Rheinisch-Westfaelisches Elektrizitaetswerk) in 2011. Those negotiations eventually broke down. Meanwhile, Bavaria’s Land government has entered into discussions on such an agreement with Gazprom.

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