Russia’s monopoly power over gas supplies

It has been a bit chilly in the UK for the last few days, but nothing compared to the temperatures as low as -35 which have hit parts of central and eastern Europe. Of course, they are used to far colder winters than us, and have different ways of dealing with the weather, but reliance on gas supplies from Russia for the majority of their heating fuel leaves countries including Bulgaria, Serbia and Bosnia vulnerable to disruption in that supply.

Gazprom, the Russian gas export monopoly, said on Friday it was supplying as much gas as it could spare. However, higher demand for the gas in their domestic market means that less is available for export than usual, with a consequent reduction in supply to other countries. An EU spokeswoman has confirmed that there has been a decrease in gas deliveries in various member states - Poland, Slovakia, Austria, Hungary, Bulgaria, Romania, Greece and Italy, and although this is not yet a crisis, it is a notable change.

There have been similar disruptions to supply in the past during particularly cold spells, and notably in 2009 when political tension between Russia and Ukraine led to a cut in supplies to parts of Europe, which pass through Ukraine, for about two weeks. This gives a clear example of some of the wide-ranging negative externalities which can come from monopoly power over such a vital resource.