Auction sales presage Gazprom European effort

Significance

Gazprom held its first auctions, for Nord Stream gas, on September 7-10. Auctions represent a departure in Gazprom's sales strategy, and suggest that it is exploring alternatives to oil indexation and long-term contracts. Auction sales would allow Gazprom to sell more gas from the currently under-utilised Nord Stream pipeline, and could form the basis for gas sales from its proposed expansion. Both Nord Stream auctions sales and expansion would advance Gazprom's objective of bypassing Ukraine for gas transit to Europe.

Impacts

• Auction sales would meet CEE states' preference for sourcing Russian gas through Western intermediaries.
• However, any loss of gas transit via Ukraine will raise concerns in some CEE states and Ukraine on transit fee and strategic grounds.
• By helping to meet EU TPA requirements, Nord Stream auction sales could reduce regulatory concerns about the line's expansion.
• EU and US sanctions against Russia do not prohibit Western company involvement in pipeline construction for gas transmission.