Gazprom’s Challenges

This is amusing:

The Kremlin’s ambition of turning Gazprom into a global energy titan is undermined by Soviet-style thinking, poor management and corruption, according to leaked US diplomatic cables.

Who knew?

Russian Prime Minister Vladimir Putin and his protege, former Gazprom board chairman Dmitry Medvedev who is now Russia’s president, have tried to use Gazprom to claw back some of the international clout which Moscow lost after the Soviet Union collapsed in 1991.

Noooo!

But leaked diplomatic cables from US Ambassador to Moscow John Beyrle paint Russia’s biggest company as a confused and corrupt behemoth still behaving like its predecessor, the Soviet Ministry of Gas.

Say it ain’t so!

The leaked cables cast Putin as Russia’s “alpha-dog” leader who allows a venal elite of corrupt officials to siphon off cash from energy sales, comments Russia’s leadership have dismissed.

This cannot be!

On a more serious note:

The US cables repeat the view of many Western and Russian analysts that Gazprom’s management misjudged the future by betting that soaring European demand would continue to support a seller’s market.

Instead Gazprom has faced demand destruction in Europe since 2009 as the global economic crisis forced European customers to slash consumption. They also often switched to liquefied gas from the Middle East, whose producers turned out to be much more flexible in their pricing policies than Gazprom.

Being a more flexible and reliable supplier than Gazprom is not difficult, but Russia being outperformed by a bunch of Qataris is bound to smart a little nonetheless.

“Gazprom was simply unprepared for the inevitable levelling off and current decline in European gas demand,” the US ambassador said in the cables, adding that Gazprom misjudged the impact of liquefied natural gas imports to Europe.

That explains the recent threats.

“Gazprom will have to cope with massive new volumes of LNG on the global market from projects already under way in Qatar and elsewhere,” he wrote.

Exactly how Gazprom and Russia cope will be interesting to see.  Gazprom in this instance can be likened to a fixed-line telephone monopoly which has just seen the first mobile network installed on its territory.  How it reacts will be crucial to its long-term viability.

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3 Responses to Gazprom’s Challenges

  1. Kalle says:

    This is hilarious, especially your earlier post that I must have missed. Keep it up! And I do hope Paris is nice. :-)

  2. Chris says:

    I’m not suprised that the Qataris out thought the Russians and I’m not sure why you think it is.

    Working day to day with Qataris I’ve found that under estimating them is not wise.

    They are also assisted by ExxonMobil and Shell amongst others.

    Qatar is also an example of BP making a stupid decision, BP had all the contacts and rights in Qatar but left in the 60s. Smart move that. Mobil step in to help develop the Gas fields and look after the Oil fields.

  3. Tim Newman says:

    I’m not suprised that the Qataris out thought the Russians and I’m not sure why you think it is.

    Too be fair, I wasn’t too impressed with the Qataris at ground level when I dealt with them, but they seem to be implementing their high-level strategies pretty well.

    And Russians have a habit of thinking they are miles smarter than everyone else, and I doubt there is a solitary Russian who would entertain the notion that Qatar has played a smarter game than Russia in this regard or any other.

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