November 24, 2006

Paying the piper

Paying the piper

Nov 23rd 2006
What if Russian gas runs low?
EUROPE has accustomed itself to a version of Russia and of Russian policy which goes like this: post-Soviet Russia is not only awash with oil and gas, it is using that energy wealth to promote its great-power ambitions through bullying and bribery. But what happens to the calculation if Russia is not an energy bully, but an energy beggar?

Russia reckons it will be short of 4.2 billion cubic metres (bcm) of gas next year—enough to fuel a couple of small countries. Alan Riley, a competition lawyer, argues in a report for the Centre for European Policy Studies that Russia's gas shortfall will increase to 126 bcm a year by 2010, only slightly less than Russia's annual exports to the European Union. Vladimir Milov, a gutsy former energy minister who runs one of the few independent think-tanks in Moscow, agrees

At first sight this sounds preposterous. Russia's gas reserves amount to 47 trillion cubic metres, a colossal amount. But like so many things in Russia, the gas industry, which means mainly a state-run monopoly, Gazprom, is as wasteful as it is wealthy. And Gazprom is so secretive that outsiders find it hard to say whether the wealth or the waste is winning.

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