Eurasia Daily Monitor
April 10, 2007 — Volume 4, Issue 70
RUSSIA POISED TO LEAD AN EVOLVING CARTEL OF GAS-EXPORTING COUNTRIES
by Vladimir Socor
Convening in Doha, Qatar on April 9, the Gas-Exporting Countries’
Forum (GECF) has taken a first step toward creating an exporters’ cartel at
the intergovernmental level. However, the Western gas-exporting countries —
Canada, Norway, and the Netherlands — oppose this initiative, as does
Azerbaijan; while Qatar’s ultimate position seems uncertain (it had to show
even-handedness as host and chair of this meeting). The Central Asian
gas-exporting countries may be corralled against their interests into an
anti-Western cartel via Russia, unless the West gives Kazakhstan,
Turkmenistan, and Uzbekistan another choice.
In deliberations behind closed doors, GECF decided unanimously to set
up a High-Level Group that would develop a common methodology on the
formation of gas export prices and conduct research on consumer markets. The
High-Level Group, consisting of deputy ministers or departmental directors,
shall discuss relevant proposals from member governments in six meetings
during the remainder of 2007, then present its results for possible
decisions at GECF’s meeting next year.
Russia stands at the forefront of this initiative by dint of its
disproportionate strength, compared to other GECF countries, in terms of gas
reserves, field technology, export potential, control of key export routes,
and presence on lucrative markets. The April 9 Forum has accepted Russia’s
offer to host the next GECF in Moscow in 2008. Moreover, Russia is offering
to serve as coordinator of the High-Level Group, lead the market research
studies on price formation, and defray a large share of the Group’s expenses
(apparently by covering the shares of impoverished anti-Western member
countries of GECF).
Some of the more radical or impatient governments — such as
Venezuela, Bolivia, and Iran — called for immediately creating a cartel
during the Doha meeting and proceeding with the price formation and
marketing studies as the next step. A more sophisticated Russia, however,
supported the sequence of steps that was eventually adopted at the Forum.
Russia fielded a powerful delegation led by Industry and Energy
Minister Viktor Khristenko, Gazprom’s president Alexei Miller, and
vice-president Alexander Medvedev at the Doha meeting. These officials — as
well as Valery Yazev in Moscow, chairman of the Duma’s Energy and Transport
Committee and president of Russian Gas Society — hinted sometimes broadly,
sometimes obscurely, at Russia’s expectations regarding a cartel-type
organization of gas exporters. Those expectations do not presuppose the
formation of a full-fledged cartel, but can be pursued through a cartel-type
group or cartel-type arrangements in selective areas.
Russian expectations seem to focus on:
a.. agreeing on common methods of price formation;
a.. allocating specific markets in consumer countries or regions to
specific exporting countries, by understandings among the latter;
a.. avoiding competition among gas-exporting countries within the
group on given markets or new ones (an intention that would clash with the
European Union’s competition policies);
a.. ensuring `market reliability’ (that is, a long-term lock on a
market);
a.. reaching understandings within the group on export volumes and
schedules of delivery in various directions;
a.. agreeing in advance within the group on new pipeline projects
(this would enable a cartel-type group to sustain its own arrangements about
market allocation to specific exporters);
a.. `joint’ exploration and development of gas fields in member
countries (implying continuation and acceleration of Russian takeovers of
gas reserves in under-developed countries and marketing the product under
Russian control);
a.. coordinate start-ups and production schedules at newly
commissioned gas fields in member countries; and
a.. plan jointly for development of gas liquefaction plants.
Given that most gas exports move through single-destination pipelines
to sub-regional or national markets (as long as liquefaction remains
limited), any cartel-type group can consist of only two or three
gas-exporting countries operating effectively in such a market. For example,
Russia’s Gazprom considers the possibility of `sharing’ certain European
markets with Algeria’s state company Sonatrach. Conversely — but also as
part of a cartel-type arrangement — Gazprom can agree to stay out of
another exporter’s market niche in a European country if that exporter
desists from competing with Gazprom in a nearby European country. In another
example of a regional cartel in formation, the South American Gas
Organization was recently formed by Argentina, Bolivia, and Venezuela.
Ultimately, an overall cartel that would evolve out of GECF could function
as an umbrella organization for regional cartel-type groupings or
arrangements.
GECF’s meeting next year in Moscow might create a standing body, such
as an executive agency or a secretariat. That would indicate continuing
progress toward organizing a cartel. The Doha meeting seems to confirm Yazev
‘s forecast in the run-up to the event: `Russia may take up an integrating
role in the creation of the gas cartel’ (RIA-Novosti, April 3).
(Interfax, RIA-Novosti, Kommersant, April 3-9; see EDM, March 29, 30)
–Vladimir Socor