Vladimir Putin’s regime is using Gazprom, Russia’s national natural gas company, to fund aggression ranging from bribery of other countries’ officials and undermining their regulatory efforts to planting false news reports aimed at disrupting their elections, an Atlantic Council issue brief has charged.
Gazprom revenue also is being used to line some of Putin’s associates’ pockets, effectively making the gas supply giant resort to questionable tactics that promote projects aimed at keeping it Europe’s dominant supplier, according to the brief, “The Kremlin’s Gas Games in Europe: Implications for Policy Makers.”
It said the Kremlin has always determined the Russian gas industry’s relationship with Europe. “After the collapse of the Soviet Union in 1991, [President] Boris Yeltsin partially privatized the Soviet Gas Ministry and renamed it Gazprom,” the issue brief said.
“The state always maintained majority control, however, and through there were efforts in the early days to make Gazprom behave as a private company, in practice it evolved into a hybrid institution that brought foreign currency into the state budget, provided a slush fund for insiders, and could be deployed as a foreign policy tool in relations with the West and the former Soviet republics,” it said.
“The Kremlin’s heightened aggression is what’s news,” said the brief’s author, Ilya Zaslavsky, a research expert at the Free Russian Foundation, at a May 24 Capitol Hill event where the report was released. “Anyone who looks at a map of Gazprom’s proposed projects can see how they’re designed to strangle central and eastern Europe.”
‘A pile of information’
Putin’s friends have benefited in St. Petersburg and Moscow, and the Russian president now wants to expand their influence to Europe, he said. “We know the FBI and its European counterparts are sitting on a pile of information that shows how these people operate,” Zaslavsky said. “Russia is successful in some countries because of corruption and lack of outside investments. The US should help assure that standards in these energy transit countries are raised so they are more effective.”
Edward Chow, a senior fellow at the Center for Strategic & International Studies’ Energy & National Security Program, who also participated in the discussion, said, “This has been going on under Putin since November 2002. The question now is what the US policy should be in recognizing that this Russian regime is trying to divide Europe.”
Simply expressing concern will not be sufficient, Chow said. “The question is what we should do now that Gazprom is recognized as anticompetitive,” he said.
Russia and its national gas company look at competition through the lens of a monopoly, observed a third speaker, Bud Coote, a senior fellow at the AC’s Global Energy Center.
“We should take a page from Russia’s book and establish strong facts on the ground that support the Southern Gas Corridor,” Coote said. “It has reached a point that we now have competition between this Azerbaijan and European Union-backed gas project on one hand and Russia on the other.”
Strengthen energy reforms
Ukraine and other transit countries should strengthen energy sector reforms so they won’t be bypassed by western projects, Chow said. “If Europe is not united on how to deal with Russia, the US should be prepared to act,” he said.
“Gazprom is not under US sanctions against Russia because President [Barack] Obama did not believe that European countries would go along with this,” Chow said. “If sanctions were extended to Gazprom, secondary restrictions would need to apply to European partners.”
Zaslavsky said, “Obviously, there are big divisions on several legal issues. The main political and security question is what will happen after 2019 when an ultimatum could take place. The main goal is to make sure Gazprom continues to supply gas to central and eastern Europe.”
The situation could turn into a major security issue, Zaslavsky said. “I read today that Russian companies have stopped supplies to Latvia because its government has denied port access for Nordstream 2 construction contractors,” he said.
Coote noted that European governments will need to prepare for when LNG becomes a competitive option by building infrastructure that move gas from terminals on the Iberian Peninsula and France to central and southern European customers.
Chow said, “More competition is needed. European countries should look at North African countries as a source for gas instead of just refugees.”
Contact Nick Snow at [email protected].