Monopoly: The drive for expansion

Synopsis: Gazprom appears a step ahead in the monopoly game, preparing now to play continents against one another.


What enables one energy company to flout consumer service norms?

State polity

Gazprom holds monopoly. It was privatized in the ’90s, with the government retaining a stake - now about fifty percent. The Russian government therefore is aware of, and supports, Gazprom objectives.

The business issue turned political. Prime Ministers Putin and Timoshenko of Russia and Ukraine respectively, carried on marathon talks to resolve the dispute on behalf of the rival energy companies.


Actually, business and politics in Russia is indistinguishable. Many officials hold dual positions - one foot in government, the other in the company. Like, Gazprom’s former chairman is now the country’s President.

Its diversified acquisitions include TV stations and newspapers. Companies like Gazprom may just be instruments to execute and extend Russian political power and influence across the world.

Covert punishment

Russia assumes a “privileged sphere of influence” over sister members of the erstwhile Union. The drive to dominate is perhaps left over from the ‘iron’ heritage of their common past!

Analysts say that, in the guise of Gazprom’s energy price rise, the Russian leadership is covertly punishing her smaller neighbours for harbouring political goals out of line with her own.

For example, pro-Western Ukraine has ambitions of joining NATO and the European Union, as does Georgia. In the latter’s military conflict with Russia earlier, Belarus had provided her support. This displeased the Kremlin, and with a steep energy price rise inflicting economic hurt, Belarus was disciplined. Similarly, Ukraine is now being dominated.

Market recovery

The global meltdown has affected nations and corporations around the world. The consequent drop in oil prices worries its producers. Gazprom’s market cap reportedly fell seventy-six percent over a year.

The energy shutdown is meant perhaps to force prices up again. The monopoly status is being used to raise revenue for the company. And, since company taxes feed the national budget, also for the state.

Expansions

EU monitors in Ukraine and Russia are concerned only with the resumption of supply. Well aware that they’ve no viable alternatives to replace Gazprom, they’re careful not to embroil in dispute.

The EU energy summit in March 2008 attempted to rein in Gazprom’s global ambitions by pressing on the Russian leadership to ratify the Commission’s energy charter treaty. This would stop the monopolistic practice of suspending supplies at will, and also allow third countries, like Kazakhstan, to utilize the pipeline network to Europe’s best interests.

The Russian government wouldn’t buy into any ‘common’ energy policy for Europe. The company also seems least bothered about losing credibility. Gazprom meanwhile warned EU ambassadors against interfering in its continental expansion plans, which include bids to acquire western energy companies, like Centrica PLC, and shareholder stakes, as in BP.

Countries that expect energy needs to grow each year, look for new suppliers to break the domination. But Gazprom appears ahead in the monopoly game, preparing now to play continents against one another - whether by laying pipelines to China and America, or winning exclusive drilling rights in the African Sahara.

Comments/opinions, anyone??