In fact, until recently Gazprom was losing money on the domestic market, according to Stern. Supplying the domestic market "certainly was a very substantially loss-making proposition until the mids," he says. And the profitability of the market should improve dramatically in the next few years as prices have been increased roughly 25 percent a year. About two-thirds of Gazprom's gas currently goes to the domestic market.
The rest is exported but accounts for most of Gazprom's revenue, though the company's total revenue is enough to account for some 25 percent of Russia's federal tax revenues.
Belgium, for example, receives a mere 1. But some of the newer, postcommunist EU members rely on Gazprom entirely for their gas imports. Gazprom, and by extension the Russian government, would seem then to have an advantage in dealing with Europe. But DeLay says the relationship is symbiotic. Losing that would hurt the company very much. Formed in to replace the Soviet Ministry of the Gas Industry, Gazprom is closely tied to the Russian government, which owns a controlling 50 percent stake in the company.
In recent years, an increasingly confident Moscow has used Gazprom to assert its authority over Russia's former sphere of influence by offering heavily subsidized gas to ex-Soviet countries such as Ukraine and Belarus. Other countries including Austria, Bulgaria, the Czech Republic, Germany, Romania, Greece and Turkey have complained that their gas supplies have also been affected at the height of demand as winter temperatures dip well below freezing in many places.
Share this on:. Read MAP. Nor is it as non-political as it claims. Not only is the Kremlin Gazprom's largest shareholder, but both the board and the management committee are peppered with political figures — including the current First Deputy Prime Minister, the Minister for Industry and Energy, and the Minister for Economic Development and Trade.
Until recently, Gazprom was chaired by Dmitry Medvedev, the Russian President and no relation of the deputy chief executive.
Gazprom was privatised from the old Soviet utility group in the s, hit by string of corruption scandals, and then taken back under Kremlin control in when the government simultaneously bought itself a controlling stake and lifted the restrictions on foreign ownership of shares. It is both Russia's largest company, and the world's biggest gas group, with nearly 29, cubic kilometres of reserves, or 16 per cent of the global total.
By virtue of its size, and the growing political importance of energy resources, Gazprom is the darling of Russian industry — a vital source of income and the route to a seat at the top geopolitical table. Alex Pravda, from Chatham House, the foreign policy think-tank, said: "Gazprom is a state champion par excellence, and the Russian government makes no secret of that. Russia says that it is simply behind the curve, that its promotion of Gazprom is no different from the behaviour of Western state corporations in the past.
But the country has a major image problem when it comes to energy. The first row with Ukraine followed hot on the heels of the Orange Revolution, which brought in a pro-Western government — prompting the mistrustful to claim Moscow was using energy as a political club to beat down pretensions to freedom in its former satellite states. When Russian oil supplies to the Czech Republic were disrupted within days of the government's agreement to host a US radar station, the chorus grew louder.
And last year's conflict with Georgia was viewed by sceptics through the prism of Georgia's role in the Baku-Tbilisi-Ceyhan pipeline which supplies oil to Europe from the Caspian Sea without reference to Russia.
As far as western Europe is concerned, Gazprom is a reliable supplier. The company's record in former Soviet states is more varied, but its relationship with such states is more complicated.
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