India’s GDP data get recalculated, Chinese-style
Russia shelved plans to turn Turkey into a conduit to Europe after the Turks downed a Russian warplane near the Syrian border in November.
Gazprom’s “export policy has always been balanced and adaptive,” says spokesman Sergei Kupriyanov. He argues that European customers have become more interested, not less, in Russian gas, given Europe’s own decline in production.
The Kremlin’s traditional hardline approach to customers was on display last year when tensions over the crisis in Ukraine led to the worst breach in relations with the West since the Cold War. “Europe has lost,” Gazprom CEO Alexey Miller declared after Russia signed its first gas supply deal with China. He said another deal would come in the “nearest future” that would allow Russia to redirect some Eu-bound gas from deep in West Siberia to Asia.
In September 2014, Gazprom started to limit gas deliveries to some EU members, including Poland and Slovakia. They had been supplying gas to Ukraine to replace supplies that Russia had cut off in a pricing dispute with its neighbor. Russia warned that the conflict with Kiev could disrupt supplies to Europe, as had happened in 2006 and 2009. In both those episodes, Gazprom cut off gas to Ukraine. Because Europe got most of its Russian gas via Ukraine, Gazprom’s actions imposed shortages on the EU as well.
In January 2015, Miller told the EU’S new energy chief, Maros Sefcovic, that Gazprom would cut off shipments to Europe via Ukraine after the current pipeline contract ran out in 2019. That would force customers to build new pipelines. “We don’t work like this,” a stunned Sefcovic told reporters in Moscow.
But since the spring, the pressure has been growing on Gazprom. The plunge in gas prices has begun to bite. Gazprom expects revenue in Europe in 2016 to be down 16 percent, the lowest in 11 years. Its giant Siberian fields are operating far below capacity. It says production this year will fall to a record low because of weak demand, primarily from Ukraine, which isn’t buying much.
In April, Brussels unsealed an antitrust complaint alleging Gazprom sold gas to Poland and the Baltic states at prices up to 21 percent higher than the average. If the charges are proven, the gas giant could pay as much as $3.8 billion in fines, VTB Capital in Moscow estimates. Gazprom denies all the charges.
In negotiations to export more gas to China, talks have stalled. After a September visit to China again failed to yield a deal to expand shipments, Gazprom hastily signed a pact with five big EU companies including oil major Shell and utility E.ON to build a pipeline under the Baltic Sea to Germany. Russian officials say they’re ready to offer lower prices to gas customers that help fund construction, as well as concessions to ensure the pact wins EU approval. The company later made a formal offer to settle the EU’S antitrust charges.
Miller has publicly backed off from threats to cease shipments via Ukraine after 2019. Gazprom is also giving in to European clients’ calls for more pricing flexibility. Slowly, Gazprom is learning how to operate like an ordinary company that has to work on its customer relations.
�Elena Mazneva, Anna Shiryaevskaya, and Kelly Gilblom, with Ilya Arkhipov, Tino Andresen, and Alex Morales
“The position of Gazprom and the Russian side is becoming flexible in light of the changing situation, defending our interests but also taking into account the demands of the European side” The bottom line As Russia tries to defuse tensions with the West, Gazprom is blustering less and promising more.
growth model. “You’ll have smaller subsidies coming from the central government, you’ll have a smaller black economy, and you’ll have crony capitalism curtailed to some extent,” Mukherjee says. “While each of these resets will be very positive for the country from a long-term perspective, all of this in the short term is extremely negative for GDP growth.” �Sandrine Rastello
The bottom line The government says India’s economy grew 7.4 percent last quarter, but actual business activity suggests otherwise.