High Time to Weaken Gazprom's Grip on EU
- By Financial Times
- Apr. 22 2008 00:00
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If the European Union needed a new warning of Russia's efforts to strengthen its grip on the continent's gas supplies, it has come in the shape of President Vladimir Putin's trip to Libya.
During the visit, Gazprom, the state-run gas monopoly, agreed to a wide-ranging joint venture with Libya's national oil and gas company. Gazprom also revealed it was talking to Italy's Eni about investing in a new Libya-Italy undersea pipeline and to Nigeria about a trans-Sahara route. The discussions follow talks with Algeria and Qatar and a determined drive to reinforce Russia's grip on central Asian gas exports.
Gazprom's ambitions make sense even at a purely commercial level. With some 25 percent of EU gas going through its pipes, it will naturally strive to boost market share, with or without partners. That is what would-be monopolists do. But, for the West, the Kremlin connection adds a disturbing political dimension -- Gazprom is the embodiment of Putin's stated aim to make Russia an energy superpower.
The EU recognizes the danger. But its ability to present a united front to Russia is undermined by the repeated willingness of leading states, including Germany, France and Italy, to strike bilateral deals. Gazprom divides and rules.
So what should the EU do? First, it must encourage Gazprom and other Russian gas companies to invest more in new production. The more gas that Russia produces, the better for consumers. Next, Brussels must accelerate internal energy market liberalization so all states benefit from a common energy pool.
Also, union members must reinforce ties with non-Russian suppliers, including Libya and Nigeria. It must redouble efforts to secure new suppliers, notably in the Caspian. The planned Caspian-EU Nabucco route needs finance and committed gas supplies. Both might be easier to find if EU states offered more explicit financial support. Finally, the EU must do more to encourage energy saving and energy diversification, backing investments in clean coal and nuclear power. With EU gas output declining, there is no time to waste.
There is no need to demonize Russia. Moscow is unlikely to use its dominance to cut off the EU. It depends on gas revenues even more than the union depends on its gas. But a stronger market position allows the Kremlin to seek higher prices and better terms -- and to exert political influence, particularly in Eastern Europe where dependence on Russian gas is highest. The only effective EU response is a unified, multi-headed and flexible approach to energy security. It is perhaps the biggest contribution the union could make to Europe's economic well-being.
This comment appeared as an editorial in the Financial Times.