Russian natural gas giant Gazprom has been criticized by western nations for abusing its market power. Russia's largest company controls 93% of the Russian market and holds 16% of the world's natural gas reserves. The company owns more pipelines than any other in the world and caused a stir internationally when they threatened to shut down a pipeline that ran through Belarus towards Europe if the Belarusians did not accept a two-fold price increase.
Gazprom is the sole supplier to many of the countries of the former Soviet bloc. It also supplies the European Union with 40% of its natural gas. The company has been accused of using its monopoly like power in Europe to blackmail other governments.
The Russians announced at 10 am on January 1 they would shut down the pipeline through Belarus if the country did not agree to new terms. Gazprom not only raised the price, but also demanded sale of 50% of the pipeline, which had previously been owned by the government of Belarus.
Is this really Gazprom abusing its market power or are they just executing price discrimination. Belarus has one of the weakest economies in Europe and its economy is dwarfed in particular by Western Europe. The price that Belarus is paying is still below the market price. Belarus pays the lowest price while other countries like Ukraine and Georgia do too.
So why is Gazprom providing subsidized gas to Belarus and other former Soviet states? The obvious answer is the political motives that have continued to exist since the Cold War. However, with this case and a similar instance in Ukraine last year one could see things differently. Gazprom is soliciting only financial benefits, not political ones. The reason Belarus pays less are based on its weak economy (weaker demand) and its important position as a transit point that makes it valuable to Gazprom. Western Europe can complain, but Gazprom is acting like any monopoly would.
Posted by Joe Saunders, Risto Keravuori, Cheryl Kong
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment