The EU May Soon have Gazprom and Vladimir Putin Running on Fumes

May 01, 2015
William E. Pomeranz

Kennan Institute - Woodrow Wilson Center

For all of President Vladimir Putin’s rhetoric about Russian nationalism and economic self-reliance, he finds himself surprisingly constrained in his ability to respond to the European Commission’s action against Gazprom.
The European Commission’s decision to bring antitrust charges against the Russian energy giant sparked an immediate complaint from Russian Foreign Minister Sergei Lavrov. He loudly protested that the European Union was changing the rules in midstream. The European Union, however, was trying to send a different message to Russia: institutions matter, and Gazprom does not get a free pass around its rules.
The commission charged Gazprom with abusing its dominant market position and overcharging customers in several countries. As a state-owned firm with geo-strategic implications, Gazprom is no ordinary company. In addition, because the potential fines are significant — up to 10 percent of the company’s global revenues — these antitrust allegations cannot go unanswered.
Yet Putin will have to respond at a time when the country’s energy and economic options are limited. He also has to swallow the European Union’s reminder that even after Ukraine, Russia is not an international rule maker.
The commission’s “statement of objections” focused on Gazprom’s use of market partitioning, which demands that gas only be used in the purchasing country and prohibits its re-selling. Such territorial restrictions violate the European Union’s competition requirements, according to the commission, and have directly resulted in higher prices in five EU states — Bulgaria, Estonia, Latvia, Lithuania and Poland.
Russia insists, however, that because Gazprom is a state-owned enterprise, Europe’s competition rules should not apply. Instead, as a “strategic” company (as designated by the Russian government), the European Union and Russia should resolve these charges on an inter-governmental level — not through the normal regulatory process.
Gazprom’s designation as a strategic company has existed under Russian law for several years. The classification was created to make it more difficult for foreign investors to buy controlling interests in dozens of domestic Russian industries, including energy, technology and natural resources. Yet this term has no legal meaning outside Russia and is unlikely to persuade the commission to drop the charges.
It turns out that Gazprom has been seeking special status in Europe for years. To no avail. The EU Third Energy Package of 2009 calls for the separation of European energy suppliers and distributors. This requirement would undermine Gazprom’s business model for Europe. For the energy monolith does not want to share its pipelines with other companies. Moscow ultimately refused to ratify the energy charter treaty and, in 2014, filed a request for consultations at the World Trade Organization, but with no evident change in policy.
Judging by the European Union’s previous actions, the commission appears unwilling to grant any special exemption to Gazprom.
The charges against Gazprom confirm what has become increasingly apparent during the Ukraine crisis — Russia is far more integrated into the global economy than originally believed. These relationships can only be disentangled at a significant financial cost.
In reality, Putin’s options on the energy front are limited. He could, of course, threaten the European Union with gas cut-offs, as he has done in the past. But that would deprive Russia — and Gazprom — of crucial hard currency earnings at a time when Russia finds itself in dire financial straits. Gazprom’s net profits are already down 70 percent this year. With Russia facing major budget deficits and domestic workers grumbling about not being paid, Putin can’t afford to lose even more money.
Putin could also pursue alternative markets for Russia’s gas. Much fanfare accompanied the $400 billion Russia-China gas supply deal in May 2014. The ultimate profitability of this agreement, however, remains in doubt, primarily because the parties failed to divulge any price terms.
The pipeline’s construction is years away from completion in any case, and there are already suggestions that, due to inflation and the decline in the ruble, significant cost overruns will occur. In the near-term, China cannot replace Europe as the major energy market for Russian gas.
Similar constraints exist in the financial markets. Putin, for example, wants to encourage Russian individuals and companies that have their money located in offshore accounts, to return it to Russia under a proposed amnesty. Such a repatriation of funds — without proper checks of the non-criminal origins of the money — runs afoul of the Financial Action Task Force anti-money-laundering recommendations. Russia does not want to be identified as a non-compliant jurisdiction by the task force, though, so the amnesty remains in draft form. And the Russian money stays overseas.
The lesson is clear. Russia is an integral part of the global energy and financial markets. Until such time that Putin can persuade other countries that Russia has a better rules-based system, he will have to abide by the present one.
Integration, it must be stressed, should not be equated with deterrence. As Putin has shown throughout the Ukrainian crisis, he is willing to act in open defiance of international norms no matter what the economic consequences. Putin’s primary leverage remains his control over the level of violence in Ukraine — the world listens when fighting is threatened or ongoing.
Putin cannot truly triumph, however, until he gets to re-write the rules of the game — whether on security, energy, trade or finance. Otherwise, he constantly will have to react to prevailing laws that Russia had no role in drafting.
The European Commission has reminded Putin that such a victory is a long way off.
The opinions expressed here are solely those of the author.
This article was originally published in Reuters.



Alexis Tsipras, the Greek PM, has rejected the creditors' latest proposal as 'absurd' (FT, June 5, 2015) but he nevertheless insisted that an agreement is imminent!! It is without doubt a flamboyant public relations maneuver without any similar precedent. Due to the fact that the militant left wing Greek government would have been unable to pass any negotiated agreement through its Marxist rank and file, a settlement 'under duress' was discovered.

What the two parties have agreed on has been named 'proposal of the Greek government' while the creditors have put forward a preposterously unpopular set of measures. Mr Tsipras would then proudly dismiss the creditors' ideas while eventually 'forcing' them to come to terms with his goverment' s demands. At the end everybody will be happy. An agreement would have been negotiated, Mrs Merkel would have saved the integrity of the euro while the militant leftist Greek government could claim victory over the 'absurd' demands of the capitalists.

The fact that the final settlement would mean further hardship for the suffering Greek people, by means of unbearable taxation, heavy state regulation of market procedures and an assault on private property, would pass almost unnoticed!!



Του Ανδρέα Ανδριανόπουλου

Προ εβδομάδος η κυβέρνηση διαβεβαίωνε πως η συμφωνία βρικόταν στη διαδικασία της καθαρογράφησης. Τώρα μάθαμε πως μόλις στάlθηκε η ελληνική πρόταση!! Κάποιος δουλεύει κάποιον. Κι όλοι μαζί, όλους μας. Τέτοιες όμως ηγεσίες θέλουμε, τέτοιες μας αξίζουν, και τέτοιες εκλέγουμε. Μετά το επικείμενο μπάχαλο της όποιας τελικής συμφωνίας θα πάμε πιθανότατα και σε εκλογές. Για να αποφασίουν οι έλληνες τι ακριβώς; Οτι θα βάλουν τιμωρία την Ευρώπη και τους δανειστές;

Η εμένα κάτι μου διαφεύγει η έχει ολόκληρη η ελληνική κοινωνία πάθει παράκρουση. Προσπαθούμε να κάνουμε κουμάντο σε κάποιων άλλων τα χρήματα. Φωναζουμε, απειλούμε και καταγγέλουμε τους δανειστές για το πως θα χειρισθούν τις τύχες των δικών τους χρημάτων; Για τι πράγμα ακριβώς τους κατηγορούμε πως μας εκβιάζουν; Πως δεν μας δίνουν τα δικά τους χρήματα για να κάνουμε με αυτά ό,τι θέλουμε; Πιθανότατα εγώ δεν καταλαβαίνω, αλλά μαζί μου και ολόκληρος ο υπόλοιπος κόσμος.

Στην Ελλάδα όμως, κατόπιν από όλα αυτά, αν η κυβέρνηση καταφύγει σε εκλογές λόγω απαράδεκτης συμφωνίας θα κερδίσει με ένα άνετο 40-45% !! Μπορεί κανείς να μου εξηγήσει τι γίνεται;



Ο φανατισμός των πιστών του κλίματος αρχίζει να ξεπερνά την λογική. Μιά ματιά στα δελτία ειδήσεων αρκεί για να εξηγήσει τα πάντα. Ενώ ένας από τους πιό άγριους χειμώνες της δεκαετίας δεν έχει ακόμη τελειώσει, ρεπορτάζ για αφόρητα κύματα ζέστης - λόγω ανθρώπινης παρέμβασης στο κλίμα πάντα - έχουν αρχίσει να μας κατακλύζουν!! Αυτό που έγινε προ ημερών δεν έχει προηγούμενο. Ενώ τα μισά δελτία ειδήσεων περιέγραφαν απίστευτες πλημμύρες, χιόνια και χαλάζι μέσα στο Μάιο (!), την ίδια ώρα η υπόλοιπη ειδησεογραφία είχε σχέση με το αφόρητο κύμα ζέστης που υποτίθεται πως έπνιγε την χώρα!! Μαγική εικόνα δηλαδή. Η πνιγόμαστε και κρυώνουμε η ζεσταινόμαστε!! Και τα δύο μαζί δεν μπορεί να συμβαίνουν !! Εκτός κι αν είσαι φανατικός του κλίματος και οπαδός της προοδευτικής - λεγόμενης - διανόησης...


Δικτατορία της αναδιανομής!
Του Άγη Βερούτη
Capital.gr – 28-5-2015

Οι σημερινές συνθήκες που έφεραν την Ελλάδα στα μνημόνια, και συνεχίζουν να την κρατούν μέσα σε αυτά και την ύφεση, έχουν ως κινητήρα την αναδιανομή εισοδήματος και πλούτου, όπου 3.000.000 συνταξιούχοι και 1.000.000 υπάλληλοι του στενού και ευρύτερου δημοσίου τομέα, ζουν από το προϊόν της εργασίας και της δήμευσης του πλούτου της παραγωγικής οικονομίας. Αυτοί βγάζουν κυβερνήσεις.

Το να αποκαλεί, λοιπόν, κάποιος θολωμένος την σημερινή Ελληνική οικονομία νεο-φιλελεύθερη, είναι στο ίδιο πνεύμα όπως ονομάστηκε ο αγριότερος και πιο φουρτουνιασμένος ωκεανός του πλανήτη μας “Ειρηνικός”! Είναι σαν να ονομάζεις κάθε Αριστερό, “Σταλινιστή”, αλλά εκείνος πάραυτα να εφαρμόζει φιλελεύθερες πρακτικές...

Ζούμε τη δικτατορία της αναδιανομής!
Ζούμε στη χώρα που βρίσκεται στην 130η θέση οικονομικής ελευθερίας παγκοσμίως από 178 χώρες!

Με φόρους Σουηδίας, υπηρεσίες Ζιμπάμπουε, και μέγεθος δημοσίου τομέα Δανίας!

Στη χώρα όπου 1.000.000 προνομιούχοι πρόωροι συνταξιούχοι και αργόμισθοι του δημοσίου (δεν είναι όλοι αργόμισθοι!), παρασιτούν από τα χρήματα του ΦΠΑ της τυρόπιτας των 1.500.000 ανέργων οι οποίοι δεν παίρνουν κανένα επίδομα ανεργίας, και που τους πείθουν κιόλας ότι αυτή η κατάσταση πρέπει να συνεχίσει! Εσαεί!



President Obama is fighting hard for free trade. HOWEVER, WITH THE WRONG ARGUMENTS. It has to be noted that all five of the benefits that the american administration’s website ascribes to freer trade are beside the point. Each of the “5 ways that trade is linked to our economic strength” highlights ways that freer trade helps American producers. The list contains not even a hint of the chief and overwhelming economic justification for freer trade – namely, the greater access to lower-priced goods and services that freer trade brings to consumers.

By ignoring the immense benefits to American consumers of having access to a larger variety of lower-priced imports – by instead promising only that freer trade will increase American producers’ profits, wages, and exports – the US government distorts and, hence, imperils for the long-run the case for free trade.
Celebrating free trade for the benefits it yields, not to consumers, but to producers is akin to celebrating new life-saving medical breakthroughs for the benefits they yield, not to patients, but to physicians and big pharma. It misses the point completely.