Russ Oil-Gas

04/03/2008 - Moscow News by Anne Shupe - On Monday, Gazprom Deputy Chairman Alexander Medvedev addressed colleagues from European energy companies and journalists on the role of Gazprom in European energy security. His speech focused on two pressing questions recently dominating headlines: the way Gazprom sets price policies to CIS countries, and his analysis of the long-term impact of increased participation by Gazprom in European energy markets. Currently, Europe receives 26 percent of gas supplies from Gazprom and by 2020, experts expect this percentage to grow to 33 percent. Lamenting what he called "an absolutely disproportionally negative politicization" of oil and gas issues with Russia in European media, Medvedev accused journalists of creating fear among average citizens about the reliability of energy supplies from Russia. He underlined this point with the contradictory results of two recent opinion surveys: one of regular European citizens conducted by the Financial Times in January-February this year and another at a conference of leaders of European energy companies. While the majority of European citizens held a negative opinion about Russia's reliability regarding gas supplies, almost 60 percent of European energy company leaders said Russia is the most reliable supplier for the next five years. Recognizing the historical link between energy and politics, Med­vedev nevertheless distinguished between political discussion and unfounded politicization, adding that the latter disturbs long-term energy projects between Europe and Russia, which harms the interests of both countries. Denying any political motivation behind the recent March 5 supply conflict between Gazprom and Ukraine's Naftogaz, Medvedev said, "[Gaz­prom's] price policies are built upon universal, non-discriminatory principals" and that his company would "not supply gas without contracts." He attributed price differentiation "during this period of transition" (until 2011) among CIS countries to the length of agreements and their level of control over gas pipelines for transit to other countries. Medvedev furthermore emphasized that Russia will be purchasing supplies from Central Asia at European market prices. By 2011, Gazprom will be supplying all consumers in CIS countries at European market prices. "In the last 40 years, we have not once cut gas supplies to Europe," Medvedev reminded, as he renounced the "myth" of his company's "unreliability." Unlike the Ukraine, Russia has not broken any supply agreements with its partners. As international contracts legally bind Gazprom to fully compensate European buyers for all possible losses in the incidence of default, Gazprom will not and "cannot break its obligations of supplies to Europe." For this reason, Medvedev corrected the term "dependence of Europe on Russia" by deeming the situation "interdependence between Russia and Europe." Medvedev stressed the importance of signing new, long-term contracts with Europe, as these agreements affect plans for increasing internal production in Russia, which is needed in order to meet growing consumer demand. When European countries, however, encourage Gazprom to boost production while they internally discuss reducing reliance on Russian gas supplies, they send mixed signals to which Gazprom has difficulty reacting. Because public opinion influences internal political discussions, Medvedev ascribed particular significance to media portrayals of the company. If the media continues to cultivate a negative image of Gazprom among average European citizens without warrant, Medvedev said, the gas partnership between Russia and European countries could in fact be disrupted. But he stressed it wouldn't be the result of any initiative on Gazprom's part.