The transformation of Russia's gas export policy in Europe

Abstract

Russia is one of the key players on the European gas market. This study investigates European gas market transformations and how the Russian gas export strategy is adapting to these changes. Analyses of contract renegotiations and reported prices show that although Gazprom still formally follows the traditional oil indexation rhetoric, it has in fact already significantly reviewed its pricing policy. However, the further development of Russia's position in the European gas market is still unclear. The basic question is whether Russia will go for spot pricing or will it still provide all price reviews within the framework of oil indexation? Analyses of the European gas market supply–demand balance show that pricing policy changes could be expected by the end of this decade, when new suppliers reach the European market and the next wave of gas glut might occur. Until then Russia will most likely follow its current strategy of delaying providing the minimum discount acceptable to the buyer for as long as possible.