Matiyeshyn on Europe, through a Ukrainian eye

On September 11 President of the Russian Federation V.Putin signed the Decree which limits the international activity of Russian strategic companies. It became “the Russian answer” to the decision of the Eurocommission which started an investigation in terms of the Russian monopolist on suspicion in violation of the antimonopoly legislation of the EU. In particular, the Decree forbids the state companies and their “daughter companies” to conduct some market transactions, and also to provide information on the activity without its permission, without coordination with a federal governmental agency. And the government is to decide which one it will be within a month.

The signed Decree is an attempt to transfer the conflict into the political plane. Thus, Russia isn’t going to listen to the initiatives of the Eurocommission on the necessity of Russia’s revision of the now-operating gas contracts with the European countries. The leadership of Russia continues to publicly ignore the main problem, – inevitability of reduction of gas export to Europe. Confrontation between “Gazprom” and the EU will have the further public continuation. In the nearest future, Russia will conduct a successful informational “operation” on inclusion of Ukraine into the conflict, with an obligatory transferring of all weight of negative PR upon it. To distance itself from the conflict with the EC, Russia will count on the diversification of gas deliveries to the Asian markets. Anyways, the informational campaign on the support of such initiatives promises to be large-scale and long-playing. And this is despite considerable problems with the realization of plans on the expansion of the Russian presence at the Asian gas market.

The situation around the conflict between the EC and “Gazprom” on gas contracts will lead to the complication of relations between Russia and the EU in other directions of economic cooperation and will negatively reflect upon prospects of relations on the whole. “Gazprom” can feel the problem of the lack of means and technologies for the development of new and previously declared deposits more and more tangibly. The main point is in the reduction of taxes, especially regarding the extraction and export of raw materials. Hence, “Gazprom” will be simply compelled to make the choice in favor of domestic or international oil and gas companies in the near future. And in some projects it will even combine participation of both parties. Otherwise, “Gazprom’s” future as the gas monopolist is up in the air. However, if earlier this had to do exclusively with export prospects in Europe, from now on issues of its monopoly position have to do with the internal gas market as well. Anyways, “Gazprom” will be necessary to the leadership of Russia for a long time, as a company for disbursement of foreign investments and budgetary funds, and also write-off of debts and economic failures of the nation-wide scale. There is a threat that this state strategic object of Russia, despite logic, will continue to further acquire debts. However, there is a probability that it will be unable to adequately react to changes of the conjuncture both at the European and at the world gas markets.

 

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  1. This sheds an interesting geopolitical light on the context of DG COMP’s move.

    Stakes are high, positions are building up on both sides. But Europe and Russia are in mutual interdependency regarding gaz (and other things): we need it, and they need to export.

    So, Mr Matiyeshyn, when and how can we expect the climbdown and the real negotiation?
    Who could broker a deal? What role will public opinions and distrust play, how can it be dispelled?

    Thanks in advance for any answer, online or offline.

    1. Dear Christophe,
      To my mind, the EU shouldn’t expect any concessions on the side of Russia in the near future. Now for Russia, represented by “Gazprom”, it is economically more profitable even to pay those fines to the European companies voiced by the European press, than to reconsider the long-term contracts. However, the concessions can touch upon such companies as “Eon Ruhrgas”, “RWE”, or “OMV”, with which “Gazprom” has special relations. It is necessary to take into consideration that “Gazprom’s” activity exactly in the countries of the Eastern Europe and Baltics is in the center of investigation of the Eurocommission. Positions of the latter countries are not always determinative for Russia in the geopolitical game. And volumes of gas exported to the above-mentioned countries aren’t comparable with volumes of the aforementioned companies. And real negotiations about certain concessions depend more on the desire of Germany and France, than on the readiness of Russia. In this context already at the end of this year displacement of accents of Russia upon the role of Ukraine will be important in this process. After all, Ukraine is the second greatest consumer of Russian gas after Germany. And adequate reaction of the countries-consumers of the Eastern Europe together with Ukraine can also become the factor capable of affecting the situation. Scattering mistrust depends on the political will of heads of the specified states. However, due to another electoral process, there is no need to expect strong steps on the side of the leadership of Ukraine. The gas question is again too politized, including by the European leaders.

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