Gazprom - Moscow’s foreign policy tool

Gazprom is decreasing its business in Europe in a move that marks a departure from the group's aim of controlling the entire value-added chain. The company has sold its stake in a German distributor, for example. High-flying plans to get involved in power plant construction have now been shelved.

The EU has always been a thorn in the Russian giant's side. The EU Commission is leading cartel proceedings against Gazprom. The group has never been willing to stick to the EU's anti-monopoly rules. Seen in this light, Gazprom's partial withdrawal from the European market is only logical; it would continue to supply gas, after all. If only all those economic contradictions and political undertones weren't there.

Not just economic decisions

Europe has long been seen as a source of trouble for Gazprom's executives. Asia, on the other hand, is the region of the future. The company has signed a long-term supply contract with China, which is said to benefit the Chinese partners while containing less favorable conditions for Gazprom. The corporation doesn't just do what makes economic sense. Rather, as a state-controlled company, it also serves as a foreign policy tool for the Kremlin. A tool that Vladimir Putin knows how to use as though it were a weapon. The Kremlin punishes political insubordination with higher gas prices; conversely, those who toe the Kremlin's line can expect price rebates.

In the middle of a very cold January in 2009, Russia and Ukraine were embroiled in an all-out "gas war" over Ukraine's unpaid bills. As a result, gas supply was sealed off from those pipelines that run via Ukrainian territory to southeastern Europe, and which cover about an eighth of the EU's demand. Hundreds of thousands of Europeans were literally left out in the cold as a result.

Since then, the EU has tried to counter Gazprom's dominance in the eurozone. Other providers were sought and found, and the EU supported the development of new technology and linked existing pipeline networks. A European pipeline project in southeastern Europe that would have sidestepped Russia failed, though, after the Kremlin bet higher and won.

Russia's competing project to the EU pipeline was first called "South Stream." But the Kremlin very suddenly changed its plans. Now, Gazprom wants to call the new pipeline "Turkish Stream," and take it all the way to the Greek border. From there, the plan is to supply the western Balkans and Hungary. In no way does the expensive project fit with Gazprom's Asian strategy. But geopolitically, it suits Putin's strategy. Along with natural gas, Russia's political influence can flow into the southeastern countries that are anyway viewed as unlikely EU candidates by Brussels.

A special case for Germany

Europe could arm itself with an energy union: the combined market and negotiating power of 28 EU states against Gazprom. It could work. But above all Germany is skeptical when it comes to such an energy union, for business reasons. The Germans have a special relationship with Gazprom, as is evidenced by the Nord Stream pipeline, which connects Russia with Germany via the Baltic Sea.

In Berlin, Gazprom CEO Alexei Miller has now said that the corporation is prepared to negotiate with the EU about a common price for gas, but that it would certainly not be the cheapest rate. It's a poisonous offer that clearly shows that Gazprom does fear a functioning European energy union, and will do what it can to thwart its development.