HomeMediaLatest NewsThe British blame Gazprom for future heating cuts

The British blame Gazprom for future heating cuts

08 September 2021

Salikhov Marcel R. President, Principal Director on Economic Studies, Head of the Economic Department

Marcel Salikhov, Director of the Center for Economic Expertise at the Higher School of Economics, commented to Nezavisimaya Gazeta on Gazprom's strategy in the European gas market.

“Traditionally, Gazprom supplied gas under long-term contracts with a formula pegged to prices for oil products. However, under pressure from the European Commission, these contracts were revised. Over the past 10 years, the share of gas supplies under oil-pegged contracts from Gazprom has dramatically decreased - primarily under pressure from European regulators - in favor of supplies pegged to prices at hubs,” - Marcel Salikhov, director of the Center for Economic Expertise at the Higher School of Economics recalls. According to him, under the conditions of the old system, when Gazprom's share of being linked to hubs was small, with a jump in spot prices, it was advantageous for Gazprom to increase exports, as this allowed it to get additional profits. “In the current situation, when more than 85% of gas supplies to Europe are tied to hub prices, there are fewer such incentives. And we must understand that gas supply contracts are being fulfilled, we are talking about additional volumes. In the current market conditions, it acts as a rational participant that maximizes its own profit,” the expert emphasizes.

Another question, he continues, is that even if such a strategy is rational, it can provoke a backlash from European regulators. “The European market is the main one for Gazprom, therefore this dependence is mutual. The current extremely high level of gas prices is causing concern among consumers and obviously influencing political mood in Europe. In this sense, Gazprom is a convenient target for attacks,” the economist believes.

In the long term, maintaining high prices will also negatively affect demand and increase the competitiveness of alternatives, including renewable energy sources in the electric power industry, Salikhov argues.

Subscribe
You will receive notifications about the release of new materials on the site. We do not share email addresses with third parties and do not spam.
Ok
Thank you!
Your application is accepted.
Ok