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Corporate Strategy:Gazprom - Paradoxes - Essay Example
Author : thompsonfreeda
Pages 7 (1757 words)
In any economy, gas and oil companies are tightly linked to the government especially in petro-states like Russia where companies are closely connected to the government that they at times become indistinguishable…
In any economy, gas and oil companies are tightly linked to the government especially in petro-states like Russia where companies are closely connected to the government that they at times become indistinguishable. After ensuring that Gazprom was under state control, Vladimir Putin acknowledged amendments on the federal law regarding gas supplies in Russia allowing the government to control interest in the gas monopoly.1 The symbiotic relationship2 has particularly been strong with the expansion of Russian energy corporations like Gazprom and LUKOIL, which are guided by a web of commercial and political motives.3 In 1990s, export of Russian gas to Europe was crucial for Gazprom, since the company experienced low domestic gas prices coupled with rampant non-payment.Delivery to solvent European consumers allowed Gazprom to subsidize it loss for delivering gas within Russia and other former Soviet republics because of political reasons.Gazprom attempted to establish itself within Europe especially in Germany through Wingas, a joint undertaking with subsidiary of BASF and Wintershall to transport gas to consumers in Germany.By mid-1990s, Gazprom had several other joint ventures in France,Finland and Italy among others and in 1995, the company obtained 10% of interconnector consortium to lay gas pipeline from the Great Britain to continental Europe.Gazprom shipped gas to Western Europe in long-term take-or-pay contracts and in 1995, Gazprom gas accounted for 21% of western European market and 55% of the Eastern European market. ...