Gazprom seeks to expand empire

January 2, 2007

Russian gas giant Gazprom has signed a deal with Belarus to sell gas for $100 per 1000 cubic meters (up from $45). The deal was signed right before 2007 hit and also sees Gazprom get a 50% stake in Belarus’ gas pipeline Beltransgaz.

Already one of the largest producers of gas in the world, Gazprom is seeking more command by securing control of the Belarussian pipeline, which is strategically important in delivering gas to Europe.

While there is widespread criticism of Russia for using gas prices to dictate foreign policy, there is also a counter-critique. State owned or not (Russia has a controlling package in the company), Gazprom is in the business of making money. The high profile cases of price hikes come from the Soviet past, with Ukraine, Georgia and others benefiting from friendly prices.

Did Belarus truly deserve to pay $45 when Europe pays over $200? Shouldn’t the market decide the price?

That’s precisely the lesson Georgia learned when it had to cave in to a new price of $235.

Friendly prices are usually artificial. And require friendship, not constant finger-pointing.

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