Thursday, 3 July 2014

Why might a monopoly status be interpreted differently?

Why might a monopoly status be interpreted differently?

A monopoly means a single supplier in a market and it is no good at all. A monopoly is that stops development. A monopoly is that...

However, properly speaking what is it a monopoly in terms of law and market? As you understand, I am going to talk about an energy market and to be exact it is about the European gas market.
In recent time, all of us have heard a lot about a monopoly of Russian gas at the European market. I myself as all of us perceive this statement such as an axiom. However, the events with South Stream pipeline project have made me more deeply consider that definition. Here are a number of questions such as: what kind of monopoly? Whose monopoly?  On the other hand, monopoly for what? According to Eurogas statistics in 2013 Europe consumed 462 bcm of natural gas where supplies from Russia accounted for 161 bcm. Deducting the volume of gas imported by Turkey, it amounted to about 29% in overall volume of EU gas supplies. Whether it is possible to consider 29% market share as monopolistic one? I am not sure ... But if yes then how we should define Norwegian Companies having 29% market share as well.

So is it a monopoly or not? In recent time we, Europeans are listening to the US in all ways (especially in energy sector). And how is it determined by the US legislation? In the US a company is deemed a monopoly if its share of the market accounts for 50% or more percent. Therefore, we are drawing a conclusion from that - neither Russian nor Norwegian companies do not enjoy a monopoly position at the European gas market.

Let's see what is going on with a transit of gas coming to Europe? As to Norwegian gas everything's alright. The gas supplies are carried out via several countries.
But what about the transit of gas from Siberia? Here you are - my questions are appearing, obvious questions. In 2013 Russia delivered for exports in total 161 bcm of gas including 85 bcm of gas transmitted via Ukraine that amounts to 53%. In other words according to the US legislation mentioned above, it is an example of monopolies in their pure form! Where is logic then?

From one hand, Russia with 29% of gas supplies to Europe is blamed in monopoly position. And, from the other hand, despite of an unreliable, outdated and in fact unmanageable Ukrainian GTS we grant the right to Ukraine to be a monopolistic transit country. At the same time, there is not any security assurance and clear evidences of that we will not be freezing next winter.

Why is an attitude to monopoly diametrically opposed?

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