Skip to 0 minutes and 0 secondsThe first key aspect of Gazprom’s actions on the European energy market to be considered is that of diversifying export routes such as North Stream and South Stream. The North Stream gas pipe line is the bilateral pipeline linking Russia and Germany. The South Stream gas pipe line is the bilateral pipeline linking Italy and Russia. In addition to increasing security of exports by adding new pipelines via new routes, a second key aspect of Gazprom’s activities has been the search for control over gas pipeline infrastructure in Ukraine, Belarus and Moldova. There are several commercial motivations for Gazprom to seek direct access to gas consumers in the EU.
Skip to 0 minutes and 47 secondsFirst of all, gas sales to end consumers have far greater profit margins than the sale of gas wholesale to European energy companies. Secondly, Gazprom’s participation in gas sales in the EU aims to ensure future demand for Russian gas, in the face of increased competition from other sources, such as increased LNG imports. Finally, Gazprom is desirous of investment and technology from its European partners, while at the same time reducing its own investment burden.
Russian gas export strategy
From Russia’s standpoint, the issue of energy security in EU–Russia energy relations is overwhelmingly oriented towards security of supply.
The risk of US LNG presents a clear threat to Gazprom’s position in Europe, especially as gas from North America is being presented in some quarters as a political solution to the EU’s security of supply issues.
There is a distinct lack of a conception of energy security as security of exports and demand. Gazprom might consider a strategy to flood Europe with cheap gas in 2016 to kill off US LNG.
Gazprom can produce and export gas to Europe at a much lower cost than LNG from across the Atlantic, and this approach would mirror Saudi Arabia’s strategy of keeping oil production elevated in order to protect market share.
© Younkyoo Kim, Hanyang University