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6th Mar 2021

Gazprom bashes EU energy plans

The European Union has come in for harsh criticism from Russia's state-controlled gas monopoly, Gazprom, with its deputy chief Alexander Medvedev calling into question Brussels' idea of breaking up EU energy giants into smaller pieces in order to boost competition.

"It is the most absurd idea" Mr Medvedev told journalists in a video conference from Moscow on Wednesday (21 February), when asked to comment on the European Commission's proposal to separate energy production from distribution networks, known as unbundling.

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  • It is unclear what implications EU energy market liberalisation would have for Gazprom activities in Europe (Photo: gazprom.ru)

"It is like selling cars without wheels", Gazprom's vice-president said, adding it would be "against basic market rules" to demand that a company must abandon some of its activities after heavy investment.

Unbundling would force companies, such as France's EDF or Germany's E.ON, to split up so that a firm generating and supplying electricity would not also own the pipes and wires that distribute power.

According to Brussels, the move would increase competition, drive down consumer prices and convince Russia to let EU firms buy bits of Gazprom or Transneft in an effort to prevent supply shocks such as the Ukraine or Belarus-related breakdowns.

But the issue has proved extremely divisive within the 27-nation bloc as well, with many countries defending their national energy champions.

Member states appear to generally favour a less ambitious commission option, under which energy suppliers could own the infrastructure, but it would be managed by separate companies, called independent system operators.

Earlier this week, EU capitals endorsed the general principle of "effective separation of supply and production activities". But they did not commit to any specific legal model, asking Brussels to do more homework on questions like: how would unbundling affect the position of vertically-integrated outside firms, such as Gazprom.

Commissioner Kroes in the hot seat

At the same time, EU competition commissioner Neelie Kroes found herself in the hot seat for recently spelling out doubts over long-term contracts as a possible obstacle to full competition.

Mrs Kroes said that "where almost all gas coming to the market was locked in for the long-term, the cumulative effect was likely to be that new entrants could not buy enough gas to build up a business, or access enough customers to create a sustainable customer base."

Gazprom's deputy CEO referred to such remarks as "irresponsible" while saying "I hope that the EU will return to its previous statements about long-term contracts being fundamental for the gas market."

"We invest billions of dollars in infrastructure" Mr Medvedev said hinting the Russian giant expects stable revenues from long-term deals in return.

Baltic pipeline questioned

In a similarly harsh fashion, Gazprom's vice-president addressed Polish and Swedish objections toward a Russian-German pipeline to be built on the bottom of the Baltic Sea.

According to Mr Medvedev, Stockholm's concerns over Moscow misusing the construction for spying purposes need a reality check. "It reminds me of a James Bond movie" he said.

At the same time, Gazprom insisted the pipeline is ecologically sound, accusing Sweden of "creating an artificial problem."

Sweden's foreign minister Carl Bildt on Tuesday (20 February) asked the consortium building the link, Nord Stream, to carry out an environmental impact study first in order to gain the green light for the project.

Stockholm also suggested that alternative routes should be investigated for a proposed natural gas pipeline, as under current plans it would be laid close to environmentally sensitive areas off the Swedish coast and could disturb WWII chemical weapons dumped in the Baltic Sea.

Russian gas giant Gazprom and German firms BASF and E.ON agreed in 2005 to build a 1,200-kilometre pipeline beneath the Baltic Sea to carry Russian natural gas to Germany. The gas link is scheduled to be up and running by 2010.

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