4 June 2014, 10:54

Gazprom pivots to Asia

Gazprom pivots to Asia

While the lame ducks of the European Commission are doing their best to sabotage the construction of the South Stream pipeline and the Russo-Ukrainian gas talks, Gazprom is retaliating in an asymmetric manner by refocusing its development efforts towards the Asia-Pacific region.

The ”deal of the century” between the Russian gas giant and the Chinese state-owned CNPC is the most visible part of the company's strategy of pivoting to Asia, but Gazprom doesn't confine itself to working with China. Alexey Miller's team adopted a holistic approach and is trying to establish a complete presence in the region, ranging from capital markets to diversified long-term contracts for LNG deliveries.

After the US and the EU launched the first stage of sanctions against Russia, experts were concerned about the threat of Gazprom being “locked out” of the Western capital markets. Theoretically, Washington could force western banks to avoid providing credits to the Russian company and may also force stock exchanges in the UK and the US to cease trading in Gazprom's global depositary receipts. Last week, it was disclosed that the gas giant is preparing a secondary listing of its shares in Singapore in order to insulate itself from western sanctions. If western banks decide not to finance Gazprom's projects, there is a second option. Recently, Gazprom issued its first-ever yuan-denominated bonds. The size of the issuance was a mere 500 million yuan, but it definitely worked as a proof of concept.

In 2013, Tokyo caved in to Washington's pressure and gave up on its plans to buy natural gas from Gazprom. Today, Japan pays for LNG a price that is at least three times higher than the price of “pipeline” gas offered by the Russian company. Last week, in a move that defies American demands, a group of Japanese lawmakers revived the project of a pipeline from Russia's Sakhalin to Japan. If completed, the project will help the country's struggle against high energy costs that are hurting the Japanese economy in the aftermath of the Fukushima disaster. On May 19th, the deputy head of Tokyo Gas' office in Paris, Takao Kasumi, said that Japan will continue the talks regarding the pipeline construction.

Judging by the efforts made by Gazprom in Asia-Pacific region, Europe has lost its status of the sole buyer and is not the most interesting market for the Russian giant. New sanctions against Gazprom will only push the company's center of interest further east. Such scenario is not bad for Russia but it is certainly bad for Europe's energy security.

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