Russia’s Gazprom forced into economically unattractive projects - Matthew Bryza

Russia’s Gazprom forced into economically unattractive projects - Matthew Bryza

Baku, Azerbaijan, July 15

By Anakhanum Khidayatova - Trend:

There are many causes for financial difficulties of Russia's Gazprom company, Matthew Bryza, former deputy assistant of the US secretary of state for South Caucasus, former US ambassador to Azerbaijan and director of International Centre for Defense Studies in Tallinn told Trend July 15.

"I suppose that western sanctions against Russia for its military actions against Ukraine are part of the issue, but there are many more factors," he said.

Bryza said many analysts and observers have noted that Gazprom has been forced into some projects that are not really economically attractive like North Stream and Turkish Stream. "And so they end up losing money."

Gazprom's financial problems also come from corruption of course, he said, adding that a huge amount of their income is being used for non-transparent purposes in Russian government.

Another big part of the financial problems that Gazprom faces is that it is forced to sell gas domestically in Russia at an unattractive economic price as a form of social support and has to make up all of its losses by selling gas in foreign countries, while demand in foreign countries, especially in Europe, has gone down, he said.

Bryza added that all these issues come together to make it hard for Gazprom to remain profitable.

Furthermore, the former ambassador said that sanctions are just one issue but probably not a major one.

"Gazprom's problem that is related to sanctions is that Europe is pushing so hard to diversify its gas supplies away from Russia that it has enabled itself to develop leverage in its negotiations on Gazprom contracts and force Gazprom to charge a lower price, and even give back money for prices that it charged that were too high in the past," he said.

Moreover, commenting on Turkmen-Russian relations in energy sphere, Bryza said that the two countries have had difficult relations for some time, though Turkmenistan has been a key partner for Russia for many years.

He said that since certainly 2010, and even before, Turkmenistan has been working hard in order not be so dependent on Russia for its natural gas export market.

"We see that Turkmenistan has growing and already large exports to China. So I think we'll see that trend continue," said Bryza. "I think we will also see Turkmenistan making a move to export gas across Azerbaijan and Georgia to Turkey and beyond."

The former US ambassador said that Turkmenistan has not been paid for what it sold to Russia for years already.

"Russia has violated its contracts with Turkmenistan, buying only 4.5 billion cubic meters this year when the contract calls for 70 billion cubic meters," said Bryza, adding that Russia has failed to pay even for these lower volumes of Turkmen gas.

"When you behave like that you destroy confidence and trust. Gazprom is behaving like this and will have great problems with establishing itself as a reliable partner for Turkmenistan," he added.

The best thing can happen to Gazprom is that it looses its monopoly and is forced to compete just like western companies, like STATOIL, BP or SHELL, according to Bryza.

"If Gazprom has to compete for markets, it will become more efficient and it will be a better partner not only for foreign countries and international companies, but also for the Russian people themselves, because they will receive better services that they deserve from Gazprom," he said.

Earlier, Turkmenistan's Ministry of Oil and Gas Industry and Mineral Resources said that Gazprom Export LLC (100-percent subsidiary of Russia's Gazprom company) doesn't pay the remaining money for the actually delivered Turkmen natural gas, without explaining the reason.

"It is not clear for Turkmen side why Russia's energy giant doesn't fully pay for the received gas," said the ministry, adding that apparently, the company is undergoing hard times financially.

Russia's Gazprom JSC neglects its contract obligations, said Turkmenistan's ministry.

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Follow the author on Twitter: @Anahanum

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