Jan 06 2009
Enter Stage Left - Gazprom
Gazprom, Russia’s juggernaut business, is slowly cutting off the Europe’s life force, natural gas. As the third largest company in the entire world, in charge of 20% of the world’s natural gas reserves, Gazprom, led by Alexey Miller, is a force to be reckoned with. It has close ties to the Kremlin, as its profits have helped bring flowing capital into Russia. Medvedev, Russia’s current President, is himself a former Gazprom chairman.
Gazprom supplies Europe with about 40% of its natural gas, through the conduit state of Ukraine. But Ukraine has failed to pay the company as much as $600 million. Ukraine denies the charges, siting Gazprom for demanding a ridiculous price hike from $179.50 per 1,000 cubic meter to $250. The market rate being $418, Russia’s energy beast argues that they have been too generous to Ukraine in the first place. Last month, Gazprom’s profits increased by 85% for the first half of 2008, increasing on an annual income of $61 billion the year before. I suppose it wouldn’t hurt to be generous, if that’s what its called, to keep the gas running through Ukraine’s pipelines. It is winter after all.
Eight countries so far (including Ukraine) are affected by the energy crunch, reporting drastic decreases in their gas pressure. For now they are calling on other suppliers, or using reserves, but this can only last so long. So, the question is, what is Gazprom trying to do here? Are they just getting their due? Logically, the American and British oil companies got away with a twisted argument, declaring they had to raise prices to a breaking point, so why can’t Gazprom if they are so all-mighty? Are their political overtones to picking on the Ukraine, a much poorer, former Soviet satellite, that has sided too much with the West, much to Putin’s chagrin. And, what happens if the two parties can’t come to terms? Perhaps now the rest of Europe will turn on the Ukraine, a much easier state to sway than the great Russian bear. And then they won’t be accepted into NATO and the EU. Sounds like a grand plan.
2009-01-06
