Russia's Gas Sector Reform in Limbo Amidst WTO Dispute and Elections

Strategic Insights -

Russia's planned gas sector reform seems to be losing steam, as the country's Prime Minister, Mikhail Kasyanov, has indicated that an overhaul of the market may no longer be necessary. This shift comes as Russia is engaged in a dispute with the European Union over the terms for its entry into the World Trade Organization (WTO), with the EU demanding non-discriminatory access to export pipelines and increased gas and oil prices as conditions for membership.

Key Takeaways:

  • Russian Prime Minister Mikhail Kasyanov has expressed doubts about the need for gas sector reform, citing domestic gas prices as a competitive advantage for the national economy.
  • Kasyanov stated that the existing gas price covers production and domestic transportation costs, and that a methodology for setting pipeline transportation costs needs to be worked out before deciding on domestic prices.
  • The head of Russia's regulatory Federal Energy Commission has given his backing to equal access by Gazprom and other producers to the transportation system, but with tariffs that would shift the cost of maintaining the gas transportation system to consumers.
  • Kasyanov announced plans to accelerate the process of liberalizing Gazprom's share structure, removing the "ring fence" that limits foreigners from directly purchasing domestic shares.
  • Experts suggest that Kasyanov's change of heart on gas reform is due to pressure from the Kremlin, which wants to retain state control over the gas pipeline system and Gazprom.
  • The Russian government is balking on the issue of increasing gas and oil prices, as demanded by the European Union as a condition for Russia's WTO membership.

Statistics:

  • Russia plans to keep domestic gas prices at a low level with the help of state regulation.
  • The existing gas price covers production and domestic transportation costs, according to Prime Minister Kasyanov.
  • Gazprom's share structure is set to be reformed, removing the "ring fence" that separates shares trading locally and overseas.
  • The head of Russia's regulatory Federal Energy Commission has backed equal access by Gazprom and other producers to the transportation system, although with tariffs that would shift the cost of maintaining the gas transportation system to consumers.

Sources:

  • National Congress (NC), October 16, p6.
  • Vedomosti newspaper.