October 8th, 2012

Putin’s new energy policy

Novatek's key shareholder Gennady Timchenko knows how to explain the advantages of competition

During the VTB Capital investment forum “Russia Calling!” Vladimir Putin not only criticized Gazprom for corruption, but also stated: “We should change the economy of the company and provide access to transport systems, first of all to gas pipes”.

Russia’s president withdrew his unconditional support of Gazprom at the difficult time for the company. The European Commission attacks the monopoly within an antitrust probe. Igor Artemyev, the long-standing head of Russia’s competition regulator, criticized Gazprom as “an ineffective company” and offered his help to the European authorities. New energy Minister Alexander Novak promised to allow western majors owning oil and natural gas licenses in Russia’s Arctic waters. Meanwhile, Novatek, the second largest natural gas producer in Russia, found a way to export its natural gas, undermining Gazprom’s monopoly on the European market. Gazprom’s margins were simultaneously hit by multi-billion discounts the company had to offer to its largest European clients and almost twofold increase in the mineral extraction tax. The monopoly declares that it will abandon the development of new natural gas fields because of the tax increase, making the government responsible for the projects that Gazprom wasn’t able to develop for many years.

The new tone of the President and bold statements of his ministers might demonstrate the shift in the Kremlin’s energy policy. Though the concept of “energy superpower” maximized Gazprom’s profits in the recent years, it undermined Russia’s energy industry long-term competitiveness at the time of rapid changes in the world’s energy market.

New pragmatic policy has its influential beneficiaries. Among them is Novatek, a raising natural gas producer, where Putin’s old friend Gennady Timchenko owns 25% stake. Natural gas ambitions are also declared by Igor Sechin, another Putin’s old friend and Rosneft’s CEO. In sum, new energy policy will create opportunities for the president’s friends, boost government’s income and, perhaps, improve relationships with the European partners. It remains to be seen whether competition among Putin’s friends is enough to foster economic growth in Russia.


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