Why?
Russia and Algeria, which account for nearly 40% of European gas imports, decided to set up a joint energy coordinating center and permanent working groups to sell natural gas to other countries.
A memorandum of understanding with Sonatrach, its main rival in Europe, is proof of Gazprom's consistency in implementing the Kremlin's gas strategy.
Russian President Vladimir Putin said several years ago that Gazprom would not be split or privatized because it is a company of extreme strategic importance for the Russian economy. He also insisted that the state should regain control of the gas monopoly.
When privatization was launched in Russia in the 1990s, the gas sphere was not split into small chunks like the oil industry was. This inspired the West to accuse the Kremlin of wanting to strengthen natural monopolies, even to the detriment of their economic efficiency.
Gazprom proved to be the driving force behind power generation, metallurgy, machine building and other sectors of the Russian economy. Gas supply lines are being steadily built in all regions of the country, including remote ones.
The crisis in the gas sector is over, and gas production is growing, even in the extremely difficult conditions of the Extreme North. Domestic gas consumption and exports to Europe have been growing year-on-year. Gazprom is scrutinizing pipeline and exploration projects in Latin America, Asia and Africa, which is logical in this globalizing world.
The company is pursuing a dynamic strategy in Europe, seeking to at least maintain its current share of Europe's gas imports and to ultimately deal directly with the end user. It is diversifying the forms of delivery (including by liquefying gas) and expanding its presence on the European markets, notably in gas transportation and underground depots.
In short, Gazprom is behaving on the global market as befits a global leader. The time when it had to sell at dumping prices is over. There will be no cheap gas any more; oil prices are skyrocketing and production is moving north.
The European Union fears that Russo-Algerian gas cooperation may develop into a strategic partnership of two powerful producers and suppliers. Europeans predict the appearance of a gas cartel similar to OPEC. The tighter Gazprom's net around the EU, the fewer chances it has to find alternative suppliers of cheaper gas. Therefore, it is trying to create an antidote: a cartel of consumers. In fact, the EU is already a consumer cartel on the natural gas market because its coordinated gas import policy disregards the interests of producers.
This policy legalized the resale of any amount of natural gas at any price. In the past, gas supply contracts were signed with different countries on different conditions at different prices, including preferential ones. The resale practice originated in the 1990s and is annually depriving Russia of up to $700 million in revenues, according to the Industry and Energy Ministry.
In addition, the EU can legally limit imports if supplies from one country exceed 30% of the total (the previous limit was 60%).
And lastly, gas supply contracts used to be signed for decades, so that suppliers could make long-term investment plans. The current ceiling is seven years; this limitation is aimed at creating a market of one-off spot contracts.
Europe's plans for liberalizing the gas market do not suit gas producers, including Russia, because transition to short-term contracts and market prices will ultimately cut gas prices.
The buyers' monopoly is inadvertently prompting natural gas suppliers and sellers to form "a gas OPEC".
Europeans fear gas shortages in winter, but it is their metallurgy, petrochemical, machine building, and other sectors that account for the bulk (28%) of gas consumption. Therefore, this is an economic problem, and Russia is ready to resolve it economically.
The West also fears that Algeria, which has modern gas liquefaction technologies, will become Russia's main partner in the development of the Arctic shelf, where huge gas reserves are located.
Gazprom is not a demon that is trying to freeze Europe to death. It is merely a producer and provider of a raw material Europe needs.
