THE continued divergence between oil and gas prices, coupled with lower gas demand, has prompted Gazprom to reduce long-term prices for five large European customers. And the move might not only signal that other customers will see similar concessions, it could also be another blow to the Russian gas monopoly’s desire to maintain oil-indexed gas contracts.
Most of Russia’s gas is sold to Europe under long-term, oil-linked price deals. But with North Sea Brent crude prices and those of European gas diverging over the past two years – oil prices have soared, while gas has registered just a small increase – European utilities, forced to buy at higher oil-indexed prices, yet selling at lower spot prices – have run up substantial losses. Europe’s gas buyers are, understandably, trying to renegotiate loss-making oil-linked deals.
And they have met with some success. On 13 January, Gazprom deputy chairman Alexander Medvedev said: “Gazprom...