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The export of Russian gas to Europe: breaking up the monopoly of Gazprom

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    Abstract

    Having exports from more than one Russian gas producer has been an important issue in the Russian–EU energy dialogue during the last decade. Nevertheless, in June 2006, Russian Federal law legalized the de facto export monopoly of Gazprom. Political and commercial interests have regularly explained the Russian strategy for the European gas market. However, it is important that economic efficiency is also taken into account. Economists often evaluate the efficiency of a policy through its effect on national welfare. In this paper, I examine both theoretically and numerically whether a liberalization of Russian gas exports would increase Russian national welfare, given that the Russian domestic market is already deregulated. The results of the paper show that the dominant position of Gazprom in the Russian gas industry might stimulate the government to support Gazprom's export monopoly. The market share of independent producers in the Russian gas market would have to be significantly increased for Russian export liberalization to be welfare enhancing.

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    Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 494.

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    Date of creation: Feb 2007
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    Handle: RePEc:ssb:dispap:494

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    Keywords: Russia; Natural gas; export; monopoly; national welfare;

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    1. David G. Tarr & Peter D. Thomson, 2004. "The Merits of Dual Pricing of Russian Natural Gas," The World Economy, Wiley Blackwell, vol. 27(8), pages 1173-1194, 08.
    2. Farrell, Joseph & Shapiro, Carl, 1988. "Horizontal Mergers: An Equilibrium Analysis," Department of Economics, Working Paper Series qt0tp305nx, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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    6. Catherine Locatelli, 2003. "The viability of deregulation in the russian gas industry," Post-Print halshs-00001308, HAL.
    7. Barros, Pedro P. & Cabral, Luis, 1994. "Merger policy in open economies," European Economic Review, Elsevier, vol. 38(5), pages 1041-1055, May.
    8. Sorgard, Lars, 1997. "Domestic merger policy in an international oligopoly: The Nordic market for electricity," Energy Economics, Elsevier, vol. 19(2), pages 239-253, May.
    9. Rolf Golombek & Eystein Gjelsvik & Knut Einar Rosendahl, 1998. "Increased Competition on the Supply Side of the Western European Natural Gas Market," The Energy Journal, International Association for Energy Economics, vol. 19(3), pages 1-18.
    10. Eirik Lund Sagen and Marina Tsygankova, 2006. "Russian Natural Gas Exports to Europe. Effects of Russian gas market reforms and the rising market power of Gazprom," Discussion Papers 445, Research Department of Statistics Norway.
    11. Rolf Golombek & Eystein Gjelsvik & Knut Einar Rosendahl, 1995. "Effects of Liberalizing the Natural Gas Markets in Western Europe," The Energy Journal, International Association for Energy Economics, vol. 16(1), pages 85-112.
    12. Keith Head & John Ries, 1997. "International Mergers and Welfare under Decentralized Competition Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 1104-23, November.
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    Cited by:
    1. Marina Tsygankova, 2007. "When is Mighty Gazprom Good for Russia?," Discussion Papers 526, Research Department of Statistics Norway.

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