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Financial Times: Gazprom issues threat to EU gas supply

Gazprom issues threat to EU gas supplyBy Neil Buckley and Arkady Ostrovsky in Moscow
Published: April 19 2006 19:33 | Last updated: April 19 2006 19:33

gazpromGazprom, Russia’s state-controlled gas monopoly, on Wednesday told European Union countries not to block its international ambitions, warning that it could redirect supplies to other markets.

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In a statement after a meeting between Alexei Miller, Gazprom’s chief executive, and EU ambassadors, the company said: “It is necessary to note that attempts to limit Gazprom’s activities in the European market and politicise questions of gas supply, which in fact are of an entirely economic nature, will not lead to good results.”

The warning follows the revelation earlier this week in the Financial Times that the UK government had considered changing merger rules to block a potential takeover of Centrica, Britain’s biggest gas supplier, by Gazprom.

Mr Miller met ambassadors of the 25 EU states in Moscow on Tuesday to discuss Gazprom’s relations with Europe, and insisted the world’s largest gas producer understood its responsibilities as supplier of a quarter of the EU’s gas.

Wednesday’s statement by Gazprom threatened to devote more of the company’s supplies to fast-growing markets elsewhere if plans to expand in Europe – where its ambitions to move into downstream gas distribution – were thwarted.

“It should not be forgotten that we are actively familiarising ourselves with new markets, such as North America and China. Gas producers in central Asia are also paying attention to the Chinese market. This is not by chance: competition for energy resources is growing,” it said.

Gazprom said that, while it would fulfil its current contracts with European clients, the future relationship with these countries should take into account the Russian company’s ambitions to move into the downstream markets.

Sergei Kupriyanov, a spokesman for Gazprom, told the FT: “We just want European countries to understand that we have other alternatives in terms of gas sales. We have a fast-growing Chinese market, and a market for liquefied natural gas in the US. If the European Union wants our gas, it has to consider our interests as well.”

Gazprom’s statement appears to be a riposte to the UK’s consideration of changing its merger control regime. Alan Johnson, UK trade and industry secretary, was briefed by other ministers in February on legal changes required to block a bid from Gazprom or any other bid that threatened energy security.

Gazprom’s threats follow an outline agreement between Russia and China to supply the Chinese market with gas from western Siberia, which is also the main source of gas for Europe. Given that Gazprom’s reserves have been static for the past five years, the supply of gas to China will decrease the volume of gas available to European countries.

Gazprom has made no secret of its ambition to supply up to 20 per cent of the UK’s gas by 2015.

Other European countries have also expressed concerns about Gazprom’s plans to take a share in their domestic markets. The EU earlier indicated it would be prepared to let Gazprom into its downstream market if Russia were to liberalise access to gas pipelines to other countries and independent producers – a prospect that Gazprom has ruled out.

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