Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

One Answer Poses So Many Questions

To Our Readers

The Moscow Times welcomes letters to the editor. Letters for publication should be signed and bear the signatory's address and telephone number.
Letters to the editor should be sent by fax to (7-495) 232-6529, by e-mail to oped@imedia.ru, or by post. The Moscow Times reserves the right to edit letters.

Email the Opinion Page Editor



Gazprom's announcement this week that it would develop the Shtokman gas field on its own made it clear that the Kremlin is determined to enter into energy cooperation only on its own terms.

President Vladimir Putin underscored this when he commented that Russia "will be the sole subsoil owner and user of the field."

But the decision to shut out partners has created some issues and further complicated several others.

The first and most simple concerns Gazprom's ability to develop the field on its own, given that it has no experience in underwater gas extraction. Putin said the firm was ready to take on contractors to help with development.

A second question is what this will mean for the timeframe of the field's development. A planned liquefied natural gas production facility has already been put on the back burner, and the opening of the field itself will now likely be delayed by the lack of a partner with the necessary technical expertise.

The target dates for opening other fields, like the Yemal Peninsula and Yuzhno-Russkoye projects, have already been put back and are unlikely to move ahead any faster as Gazprom takes on an even heavier load. This at a time when Gazprom's ability to meet foreign and domestic supply contracts is being questioned not just by energy analysts, but by members of the government.

Why Gazprom even bothered to announce a shortlist of five companies for the tender if none of the offers met the requirements remains a mystery.

Who will be interested in working as contractors after the experience of the ditched tender remains to be seen. One of the five on the shortlist, Total, said Thursday that it would not be interested.

Who could blame the French company? After long expressing the desire to work with foreign firms, and maintaining this summer that it was close to choosing a partner, Gazprom's snap announcement seemed to come out of the blue.

A final question is what effect the decision -- which eliminates the United States for now as a destination for gas from Shtokman -- will have on negotiations with Washington over accession to the World Trade Organization.

There is little question, though, that geopolitics played a big role. The energy card is always the first out of the Kremlin's hand, no matter if the issue is gas supplies to Ukraine and other former Soviet states or Russia's presidency of the Group of Eight this year. This could explain state moves to gain control over more of the country's energy assets.

True, gains and losses are associated with any decision, economic or political. When economics and politics are wound as tightly together as they are in global energy markets today, the balance between the two is difficult to compute.

Gazprom and the Kremlin appear to have given the political the priority over the economic in the Shtokman case. What the economic costs of the decision ultimately turn out to be will give us a better idea about whether the trade-off was worth it.