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Putin's Gas Strategy Backfires as Prices Fall

By Kevin Spak,  Newser Staff

Posted May 16, 2009 10:43 AM CDT

(Newser) – The very strategies that made Gazprom an international force are now causing the energy giant—and consequently, Moscow—unaccustomed financial stress, the New York Times reports. Vladimir Putin built Gazprom into a goliath by aggressively dominating natural gas supplies, but to do it, he entered into long-term contracts to buy gas from Central Asian countries at now-insane prices. With demand and prices down drastically, Russia is being forced to sell at huge losses.

Worse, it’s been forced to shut down its own far-cheaper wells to bring its stockpiles in line with plunging global demand. Gazprom’s profits are projected to be cut nearly in half this year, and with them the taxes it pays. Because Gazprom is the country’s biggest taxpayer, it could seriously impact the Kremlin’s finances. “It’s an extraordinary turnaround from what everybody was expecting,” said an expert at the Oxford Institute for Energy Studies.

Russian gas monopoly Gazprom chief Alexei Miller and Vladimir Putin.
Russian gas monopoly Gazprom chief Alexei Miller and Vladimir Putin.   (AP Photo/Grigory Dukor, Pool)
Russian Prime Minister Vladimir Putin, left, and Russian gas monopoly Gazprom chief Alexei Miller in April.
Russian Prime Minister Vladimir Putin, left, and Russian gas monopoly Gazprom chief Alexei Miller in April.   (AP Photo/RIA-Novosit, Alexei Nikolsky, Pool)
A logo of Russian gas giant Gazprom is seen reflected in a mirror, bottom, as a man walks up the staircase of Gazprom headquarters in Moscow.
A logo of Russian gas giant Gazprom is seen reflected in a mirror, bottom, as a man walks up the staircase of Gazprom headquarters in Moscow.   (AP Photo/Ivan Sekretarev, pool)
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COMMENTS
Showing 2 of 2 comments
kokuaguy
May 17, 2009 12:34 PM CDT
I think today's story about gays being bashed by Russian authorities should be on this page as a related story.
kokuaguy
May 16, 2009 4:52 AM CDT
Couldn't happen to a nicer guy! By the way, hey, jemikeos, how can you be numero uno on Newser, but you so seldom let us hear from you?

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