How Gazprom lost friends and gave up market influence
by
Neil Buckley
Ten years ago, Russia’s Gazprom was sitting pretty. It had the world’s largest natural gas reserves and Moscow was about to chair the G8 group of big countries for six months, taking “energy security” as its theme. Gazprom seemed ideally placed to present itself as the reliable alternative to unstable Middle East suppliers.
Then it cut off gas to Ukraine.
A decade later, the event looks like one of the great acts of corporate self-sabotage – especially after Gazprom repeated the move in 2009, hitting onward supplies into the EU. The group badly undermined a reputation for dependability nurtured since Soviet days, and awakened Europe to the idea of Russia using energy as a “weapon”.
Moscow seemed convinced the west would blame Kyiv, which was refusing to accept a big price increase. Instead Europe and the US saw it as retribution for Ukraine’s pro-democracy Orange revolution in 2004. It was the first time since the cold war that Russia had put geopolitics ahead of economic interests – foreshadowing events since Ukraine’s second revolution in 2014. Gazprom’s market value, which in 2008 topped $US365 billion, is today about $US38 billion. “People saw Gazprom behaving as an extension of foreign policy rather than as an independent company, and that hurt – and it continues to hurt,” says Chris Weafer, of Macro-Advisory, a Moscow consultancy.