The Gas Battle Ahead

It's a major battle that is shaping up between the Russian gas giant Gazprom and the European Commission.

And it will have major ramifications for both the European Union and Russia.

In London yesterday and today I have been discussing these issues and what is likely to happen.

When Gazprom CEO Alexey Miller meet the EU Ambassadors last week he was clear in developing the vision that guides the development of Gazprom.

He is undoubtedly genuine in his wish to develop close links with the major West European markets. In much the same way as we want supply security, he naturally wants demand security. This is a necessity also in view of the enormous investment needs that Gazprom faces in the decades ahead.

But it is obvious that when we want as open, transparent and competitive markets as possible, Gazprom wants to establish a position where it can use monopoly pricing powers in the future. And here we obviously have sharply diverging interests.

You can see this in three different facts.

First: They want to get control of the distribution networks as much as possible. That control they have in Russia through Transneft and are now aggressively seeking in other parts of the CIS area. They are manoeuvring to get control in Ukraine, recently succeeding in getting it in Armenia and are now putting heavy pressure on Belarus. And there are clear signs of them wanting to gradually push this approach as far towards the West as they can.

Second: They are very firm in their efforts to block other European states from independently accessing the considerable gas reserves of Central Asia, notably Turkmenistan. This was a key part of their dispute with Ukraine earlier this year, and we see how they are now repeating that position in more general terms. There is no doubt that this is very important to them.

Third: They have reacted very aggressively to the recent message by European Commission President Barroso to President Putin that, in much the same way as the Commission is applying European competition rules to Microsoft, it reserves the right to do so against Gazprom.

According to Gazprom CEO Alexey Miller, it was these words of Barroso that lead President Putin to rush to China and to seek to sell the gas to them instead of to Europe.

When he meet the Ambassadors of the European Union in Moscow last week, he explicitly said that if the European Commission intended to apply the competition rules against Gazprom they would simply not sell to the European Markets. It was as blunt as it was clear.

These three facts together of course add up to a rather worrying picture. The energy-political complex of Russia is seeking to extend a situation of virtual monopoly control of gas supply and distribution as far to the West as they can.

Although their ambitions are clear enough, their chances of success are far less so. But ultimately it will depend on the policies that the countries of the European Union adopt.

And that will be the subject of further discussions.

We want as open, free and transparent market for energy in as large parts of Europe as possible.

Certainly within the European Union. But preferably also beyond.

And there is no reason why the European Union should not use its existing acquire the new instruments necessary to assure this.

That's truly in the interest of everyone - not the least of Russia.

Tomorrow I'm off to Berlin. Rest assured the issue is high on the agenda there as well.