Russia has fallen victim to monopolistic policies as state-controlled producer Gazprom failed to respond to urgent calls from European customers to boost pipeline gas deliveries.
Natural gas spot prices in Europe recently hit record highs on the back of growing demand and low storage, with underground facilities on the continent just 55% full, against the five-year average of 72% for this time of year.
Gazprom has consistently refused to deliver more pipeline gas to continental Europe. Some critics suggested it is retaliating against opposition to its controversial subsea gas pipeline project, Nord Stream 2.
There is also a view that the gas giant has exhausted its spare production capacity after years of underinvestment in greenfield projects, with last year’s shut-ins of wells due to the Covid-19 pandemic requiring longer and more expensive efforts to rectify.
Although Moscow has described Gazprom as a reliable energy supplier to Europe, the company has been reducing gas export flows to the continent this summer, with the latest cut reportedly last weekend on the Yamal pipeline.
The Kremlin has refused to hear pleas from domestic oil producers and gas independents, such as Rosneft and Novatek, to remove Gazprom’s monopoly on pipeline gas exports to Europe.
Most oil producers in Russia control significant gas reserves. Their development has been on hold or slow because of the lack of export options and a gas transmission network in the hands of Gazprom, rather than an independent operator.
Moscow could have obtained better acceptance of its new gas pipelines in Europe if consumers had a choice of other Russian suppliers, not solely Gazprom, which is often seen as an arm of the Kremlin.
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