Gazprom Says U.S. Can’t Prevent European Reliance on Russian Gas

Gas Flame file photo

(Bloomberg – bloomberg.com – Elena Mazneva – June 3, 2014) OAO Gazprom (OGZD), Russia’s gas-export monopoly, said U.S. pressure won’t stop it from supplying fuel to Europe and increasing market share in the region.

“We understand that the U.S., sitting high on a hill and independent of economic cooperation with us, is pushing Europe to take wild steps,” Gazprom Deputy Chief Executive Officer Alexander Medvedev, told a news conference in Moscow today. “I think that logic of European business cooperation won’t allow dementia to set in. Russian export restrictions are impossible.”

Gazprom is going to provide 30 percent of European natural-gas demand in 2020, maintaining last year’s record level, the Moscow-based exporter said today in a presentation distributed before the press conference. The figure may rise to 32 percent by 2030, it said.

The Russian company laid out targets as President Barack Obama began a European tour in Poland, where Prime Minister Donald Tusk has criticized Gazprom’s power over the region. In March, Obama called for Europe to reduce dependence on Russian gas in response to President Vladimir Putin’s annexation of Crimea from Ukraine.

While the U.S. and EU have jointly sanctioned more 100 individuals and 20 companies, Europe’s reliance on Russian energy has made it difficult to reach the necessary consensus on how to respond to Putin’s actions in Ukraine, diplomats have said.

Limit Power

Poland’s Tusk wants coordinated action to limit Gazprom’s power in Europe. The only way to be “an equal partner to big suppliers” is to form a united front, Tusk said on May 21.

In an op-ed column published in the Financial Times in April, Tusk called for the creation of an EU institution to negotiate energy contracts with Russia, along the lines of joint purchases of uranium for nuclear power.

Tusk’s proposal doesn’t make sense for the European gas market, Medvedev said today.

Gazprom estimates its gas exports to Europe may decline to 154.8 billion cubic meters this year from 161.5 billion cubic meters in 2013, according to the company’s presentation.

The estimate is “conservative” and may change depending on the weather, Medvedev said.

He declined to forecast the average price for Europe this year. In 2013, the company gained $63 billion in revenue from the region before paying out export duties to the Russian budget.

Total volumes of gas that Gazprom may sell in Europe under take-or-pay clause across all its contracts in Europe will total 4.1 trillion cubic meters, Medvedev said.

“We’ve been establishing our cooperation for 40 years,” he said. “We experienced the Iranian crisis and the Afghan crisis, aircraft crises, the collapse of the Soviet Union, defaults and so on. Our relations are characterized by interdependence.”

Article ©2014 Bloomberg L.P. All Rights Reserved.  Article also appeared at http://www.bloomberg.com/news/2014-06-03/gazprom-says-u-s-can-t-prevent-european-reliance-on-russian-gas.html

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