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7 Jul, 2008 03:47

Revolution on Russian gas market

A new law is set to give “non-discriminatory access” to Gazprom's pipelines. The EU and World Trade Organisation have been lobbying hard for the move – but energy producer Lukoil warns the reform actually jeopardises Eur

The EU’s “Reciprocity Clause” blocks Gazprom buying energy grids within the EU until European firms can do the same in Russia.

Before letting Russia join, the World Trade Organisation wants – at the very least – third-party equal access to Gazprom’s 150,000 km network.

Former UES chief Anatoly Chubais says the government signed a new law on Monday guaranteeing “non-discriminatory access”.

A leading power sector investor claims such reforms will come despite – not because of – Western warnings.

“The pressure from foreigners might have an opposite effect. The Russian government tends to be very prickly about being pushed, but they are smart. People in the Russian government are typically smart folks, at least the ones I’ve encountered, and I’m sure Medvedev does understand that competition breeds efficiency,” said David Herne, CEO of Halcyon Asset Management.

Lukoil produces 7% of Russia’s natural gas, around 10 billion cubic metres a year. Access to Gazprom pipelines would allow export to Europe, where prices are five times higher.

However, Lukoil’s head of investor relations warns a free-for-all pipeline battle actually threatens EU supply.

“This potential measure made in a rough manner can destroy all these elements of energy security, which is not a desirable variant for any side of this business – for producers, for the state, for the consumer side,” Gennady Krasovsky warns.

Chubais lobbied for pipeline democratisation because Gazprom could have held his newly-privatised power plants hostage to supply. He added that the liberalisation of the entire Russian gas market would follow sooner or later.