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Russian Natural Gas Exports to Europe: Effects of Russian Gas Market Reforms and the Rising Market Power of Gazprom

  • Eirik Lund Sagen
  • Marina Tsygankova

Gazprom, the dominant gas company in Russia, is widely believed to be the key supplier of gas to Europe in the foreseeable future. However, there are numerous uncertainties and challenges within the Russian and European gas industry that may alter the allocation of Gazprom´s gas sales between domestic and export markets. In this paper we use both theoretical and numerical models to study potential effects on Russian gas exports from changes in Russian domestic gas prices and the production capacities in 2015. We also investigate whether the liberalization of the European gas markets may provide incentives for Gazprom to induce monopoly power in its export markets. Our main findings suggest that both increased domestic gas prices and sufficient production capacities are vital to maintain Gazprom´s market share in Europe over the next decade. At low domestic prices, Gazprom may even have difficulties to carry out its long-term export commitments. However, if export possibilities are ample due to both lower domestic demand at higher prices and high overall production capacities, a large share of spot trades in Europe may encourage Gazprom to exercise market power in its export markets.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.44434.de/dp597.pdf
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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 597.

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Length: 30 p.
Date of creation: 2006
Date of revision:
Handle: RePEc:diw:diwwpp:dp597
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  1. Dominique Finon & Catherine Locatelli, 2002. "The liberalisation of the European gas market and its consequences for Russia," Post-Print halshs-00177828, HAL.
  2. Catherine Locatelli, 2003. "The viability of deregulation in the russian gas industry," Post-Print halshs-00001308, HAL.
  3. Holtsmark, Bjart & Maestad, Ottar, 2002. "Emission trading under the Kyoto Protocol--effects on fossil fuel markets under alternative regimes," Energy Policy, Elsevier, vol. 30(3), pages 207-218, February.
  4. Quast, Oliver & Locatelli, Catherine, 1997. "Russian natural gas policy and its possible effects on European gas markets," Energy Policy, Elsevier, vol. 25(2), pages 125-133, February.
  5. Krichene, Noureddine, 2002. "World crude oil and natural gas: a demand and supply model," Energy Economics, Elsevier, vol. 24(6), pages 557-576, November.
  6. 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.
  7. Dominique Finon & Catherine Locatelli, 2002. "The liberalisation of the European gas market and its consequences for Russia," Post-Print halshs-00187059, HAL.
  8. Mohammed A. Al-Sahlawi, 1989. "The Demand for Natural Gas: A Survey of Price and Income Elasticities," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 77-90.
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