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. Last Updated: 07/27/2016

OMV Deal Revives Fear of Gazprom

VIENNA -- A deal signed last week between Gazprom and Austria's OMV revived fears Moscow is tightening its stranglehold over its European customers.

For some, however, the leading gas exporter poses no threat and this accord with a transit country strategically located between Eastern and Western Europe could improve security of supply.

On Wednesday, Gazprom signed a memorandum of understanding with oil and gas group OMV about taking a stake in its gas hub and joint storage projects.

"It's part and parcel of a very clear strategy that Gazprom is pursuing, which is to strike bilateral deals with individual member countries and to avoid having to discuss, negotiate gas contracts and gas security with the European Union Commission as a whole," said Dieter Helm of Oxford University.

"Gazprom has been remarkably successful in each and every component of the strategy it has been pursuing," he said.

Wednesday's deal coincided with a visit to Austria by President Vladimir Putin, who praised it as a model partner for energy exports.

"Austria is the biggest and, I stress this, the most reliable transit agent for Russian gas," Putin said. "Around one-third of Russian gas goes through Austrian territory. This is our contribution to European energy security."

Gazprom hopes to boost its share of Europe's gas market to 30 percent by buying into gas storage, gas marketing and power firms, a company source said.

"There is concern that Gazprom is moving down the supply chain in Europe and that it is gradually acquiring distribution and storage assets," said energy analyst Damien Cox of John Hall Associates.

Gazprom's inroads into the EU include a landmark deal with Italy's Eni to sell gas directly on the domestic market.

In Britain, Gazprom has moved into the commercial gas market, and wants to boost its share in the interconnector pipeline and expand storage capacity.

OMV said having Gazprom as a partner for its gas hub would only strengthen its position.

"We want to make this the biggest hub in continental Europe," said OMV CEO Wolfgang Ruttenstorfer on Thursday during an annual general meeting. "If Gazprom is one of the partners, then this is even more of an incentive to bring more gas to the hub."

Other analysts agreed that Russia could play a positive role.

"Apart from [German-Russian gas trader] Wingas, Gazprom ... has a couple of storage facilities, and not much else [in Europe]," said Jonathan Stern, Russian gas specialist at the Oxford Institute for Energy Studies.

He said it would only have a serious presence in the EU if it took over a major firm and that would never be allowed to happen.

Europe's perception of Russia as a major threat was, he said, based on the current climate, but not on any real prospect of Russia cutting off supplies to major consumers.

"The political climate today is such that when anything happens to do with Russia the question is: how is it going to damage Europe? What is the danger for Europe?" Stern said. "This is a reflection of a political climate."