The European Gazprom

Setting the stage for a contentious battle between Russia's gas monopoly and its European consumers, a European Union has agreed to drop restrictive conditions in future contracts. These clauses are at the heart of the battle over "take-or-pay" contracts, which prohibit buyers from reselling natural gas to third parties. According to European officials such contracts are anti-competitive and distort Europe's single market. Gazprom has countered that gas field development relies on these kinds of contracts, which spread the risk between producer and consumer. Russia and Algeria, two such producers, are biding their time. Diplomats said Algeria and Russia are pressing for new-style supply contracts that would give producers a share in any profits made on selling their gas, Reuters reported. But the European Commission is likely to resist any clause that is conditional on internal borders within the single EU market. Gazprom should try to leverage the opportunity EU gas market liberalization brings instead of preventing it from happening.


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