Gazprom Deputy CEO Alexander Medvedev on RT
RT: Many of Gazprom's Western clients like Bulgaria and Germany are already talking about seeking financial compensation for the losses suffered during gas cut offs. How are you planning to resolve this issue if and when Gazprom receives the claims?
A.M.: All these clauses are part of our contracts and we will act in full compliance with our contracts, and we should not forget that the damages should be documented and proved.
RT: Putin actually blamed George Bush and the U.S. administration for backing Ukraine in the gas conflict, saying you can do whatever you want and we’re closing our eyes on that.
A.M.: Not only this but, rather surprisingly, in the middle of our negotiations with Ukraine in December a document named “Strategic Charter” appeared between Ukraine and the United States. One of the clauses of this charter is that Ukraine and the United States will closely cooperate on a transit system in Ukraine. It looks really strange because no American firm is involved in the transit or production of gas for delivery to European customers.
RT: Turning to the new pipelines, what proportion of Europe's gas will ultimately come through South Stream and Nord Stream?
A.M.: We should not calculate it in a static way because the demand is growing. We're not only planning to have 55 billion cubic metres for Nord Stream and 31 for South Stream, but also we have started to look at how to increase the transit capacity of South Stream, maybe to increase it for an additional 16 billion cubic metres of gas because the demand is there. From the cost point of view, a pipeline of 47 billion will be more economical than 31 billion.
RT: Many western analysts say that the South stream is a very expensive project compared to Nabucco, and that Russia needs it only to preserve its gas monopoly.
A.M.: Our project will be absolutely economically justified and the tariff which will be applicable to this pipeline will be absolutely competitive as we will do with Nord Stream. And we should not forget at least one positive consequence of the economic crisis: the cost of materials, services, equipment is going down. That's why we forecast the cost of the project will go down substantially.
RT: Let's talk about the gas price formula. Gas prices are currently linked to the oil price. That's obviously not helpful now. Would you like to change how you calculate gas prices?
A.M.: First of all, it's linked with crude oil directly and this system has already existed for more than 40 years. These formulas have led to the competitiveness of natural gas. And the second factor – if we look at the spot prices, historically they are closely correlated with price formulas based on oil products. The only difference is that it is much more volatile and less predictable. That's why more and more of our clients would like oil-product based prices, and in respect for the future of these prices, it is quite clear that as soon as the economic recovery begins, the statement that the epoch of cheap energy resources is over will come back again.
RT: Would Gazprom's customers welcome new gas prices based on a new formula?
A.M.: We are not looking for sky-rocketing prices. We would like to have predictable, stable, and fair prices which would allow us to keep our investment program and to develop our core business – which is natural gas, crude oil and power generation.
RT: Have you detected a shift in the EU attitude towards Gazprom's involvement in gas production and distribution? Is the EU becoming more or less accommodating?
A.M.: We are not newcomers. We are already a substantial player in Germany, the UK, and other countries. It's natural because we have gas in our hands and we know how to deliver it in the most optimal way. All of our customers are happy – irrespective of size.
RT: Do you think talk about 'energy security' is really a cover to keep energy assets in national hands and block foreign investment?
A.M.: Internationalisation of economic life is an objective trend. Quite obviously every state has its interests and security interest, but in view of the huge amount of investment necessary in this field, international cooperation is inevitable. That's why we have cooperation with our German colleagues, Italian colleagues, with the Dutch colleagues, and in February we will inaugurate the first deliveries of LNG from Sakhalin-2, which is a good example of real international cooperation.
RT: Is the current economic climate a good time to invest in foreign energy assets?
A.M.: It's a subject of feasibility. Obviously it’s not the easiest time, but good projects will always find good financing.
RT: Turning to the financial markets, how easy is it for Gazprom to replace bank credits with its own funds?
A.M.: It’s not easy, but our stable revenue stream is not forcing us to think about refinancing or new borrowing. Even if we will not be in a position to borrow for some time, our programmes will not suffer.
RT: So what impact will that have on your future plans?
A.M.: Obviously we will carefully consider all the sources of financing, but we have a stable credit portfolio, and we have all our export contracts free of any pledge. So we have the possibility easily to borrow additional money. Every bank will be happy to provide us money based on the signed export revenues, but we still keep it as a reserve and we will use it only if it will be necessary.