Putin's Gas Strategy Backfires as Prices Fall
By Kevin Spak,  Newser Staff
Posted May 16, 2009 10:43 AM CDT
Russian gas monopoly Gazprom chief Alexei Miller and Vladimir Putin.   (AP Photo/Grigory Dukor, Pool)
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(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.