Gassing It From Both Sides

The second week of Champions League last-16 action kicks off tonight, with a pair of very juicy matches indeed: Bayern Munich at Juventus and Barcelona at Arsenal. So maybe it’s the appropriate time for a little reminder about one of that competition’s chief sponsors.

Gazprom has paid big to associate its name with Europe’s leading international football club competition for a number of years now, and at every commercial break you’ll see an elaborate paean to it on your TV screen, generally in cartoon form and accompanied by a medley of leading tunes from Tchaikovsky. The thing everyone must remember is that Gazprom is not really a company in the conventional sense of that term. Rather, it is a component of the Russian state, tasked with making money, for sure, but also with carrying out Putin’s strategic objectives. Those have included, multiple times, forgetting about money entirely and cutting off gas supplies to entire countries – generally in mid-winter, of course – to make them knuckle under. Among these victims have been the Ukraine, of course, but also those EU countries, generally to the East (e.g. Bulgaria, Slovakia, Estonia, Finland), which have not had the resources or time to make the considerable infrastructure switch from the heavy dependence on that gas that they had during Soviet times.

So you can watch those playful cartoons of serious-looking employees manning gas pipeline control rooms, etc., flick by on your screen, but you need to remember: this is a “company” that would be glad to simply let you and your family freeze; all that it takes is for Putin to give the word. The sad fact that it has been able to do that reflects the absence of any common EU energy policy. Yes, the Commission has certainly been aware of the problem, and of course there exists a Directorate-General for Energy within the Commission, now headed by the Slovak Maroš Šefčovič. And in one sense it’s reassuring to read (in Dutch, from Het Financiële Dagblad; behind paywall) that the Commission recently concluded from a study that “well coordinated actions by member-states, above all in case of emergency, can considerably increase the security of [natural gas] delivery.” (On the other hand: Why did they find this out only recently? And what are they going to do to make that conclusion a reality?)

Fortunately, other developments have occurred which – often independently from anything the Commission might have done – serve to lessen this dependency on Gazprom and Russia. For one thing, demand for natural gas is declining simply due to increased energy-efficiency and alternate renewable sources of energy that are coming on-line. And there are other developments, too, discussed in a separate article not stuck behind a paywall (although it is in Polish):

“American natural gas arriving on European shores forces Gazprom into a battle for the market and for investors.” Yes, the Americans are coming to the rescue again, specifically the shale-oil companies which, via fracking, have unlocked considerable new supplies of both petroleum and gas there on the North American continent. Mighty kind of them, you have to admit, namely to pollute their own ground-water and a as result have so much gas coming out of local household water-taps that you can light a match and explode it, all just to produce some more fossil fuels to sell. But the business of America is business.

Unlike oil, one just cannot ship natural gas from one country to another just like that. Generally you need to do that in liquid form – Liquid Natural Gas – but that requires considerable investment in facilities to freeze and process the gas for shipment, then unfreeze it at its destination. But the key recent development has in fact been that such investment has been undertaken to enable just that – in the US (but also in Algeria and Norway) in order to ship the gas on its way and also on the receiving-end, at new LNG terminals in the Netherlands (Rotterdam), Spain, Finland – and also Latvia, where this Rzeczpospolita article reports the authorities have recently signed a contract with the Norwegian state oil company Statoil for half of that country’s natural gas needs, and have further announced that when it comes to the other half of that demand, he who is cheapest will win the contract. (As a side-comment, you know that that Latvian terminal is vulnerable to destruction from Russian surface-to-surface missiles with the touch of a button; and further that the Russian authorities are just itching to do that.)

The key take-away I get from Rzeczpospolita, however, is how – faced with a drastic decline in their market position caused by all these new alternate sources of natural gas shipped in from North, West and South – Gazprom authorities continue to act as if it all were still a purely commercial question. They have gone to New York to try to attract new investment, and they have also gone to Singapore for the same purpose. They continue to speak about their cost-cutting plans, which should enable them to remain competitive even in this changed market-situation.

But I repeat, Gazprom is no “company” in the ordinary sense; it is a (fading) geopolitical weapon. Is it trying to fool people with all this MBA-type talk about competing in the new market; or could it simply be fooling itself? It has not fooled key observers in Europe with long-enough memories, nor has it fooled the European Commission. One can hope Europeans will soon have Gazprom completely out of their lives – and off their TV screens – within the not-so-distant future.

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