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Russia’s building a petro-based empire

Marketplace Staff Apr 27, 2006


KAI RYSSDAL: While Americans have been bemoaning high gas prices, the Russian government is busy counting the money. Russia has been nationalizing its petroleum industry for the past year. And it’s looking for more. Today the Russian oil giant Gazprom cut a deal with the German chemical firm BASF. And, Alasdair Sandford reports, Russia doesn’t plan to stop there.

ALASDAIR SANDFORD: Putin says if Europe is serious about opening up its markets, it shouldn’t shut Russia out. Under the deal, BASF will help develop a Russian gas field. In exchange, Gazprom wants a cut of distribution and retail sales in Germany. Leo Drollas, chief economist at the Centre for Global Energy Studies in London says it makes economic sense.

LEO DROLLAS:“They want to deepen their involvement in the whole chain. And what they want to feel is that they can be free to do so in Western Europe. And any balking of this plan would strike them as really strange and anticompetition.”

Gazprom has also been eyeing Britain’s biggest gas supplier Centrica. Prime Minister Tony Blair says he won’t try to block a takeover. But Europeans are nervous about so much of their gas coming through Russian pipelines, especially after Russia briefly cut supplies to Ukraine in January. But Axel Busch of the journal Energy Intelligence says it’s unlikely Russia would do that again. It needs the West.

AXEL BUSCH:“It’s not enough just to find oil and gas. You then have to get it out of the ground, you have to transport it market, to your refinery, and then to your end users. . . . All of which demand huge infrastructure which is colossally costly. So they will need Western investment and they will need both money and expertise, I think”.

Even so, some analysts say Europe would do well to heed the Russian president’s warning to keep its markets open.

In Paris, I’m Alasdair Sandford for Marketplace.

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