The general dynamics of the LNG market suggest a cartel may be much more difficult to put together than is feared. Russia, dominant in Europe, may benefit from a short-term respite in competition over European market share, yet with over a quarter of the world's gas reserves it is bound, in due time, to seek a larger presence there and in other regions. Iran currently plays a negligible role on the international gas market, while Qatar, at 9.2% of world's gas reserves, accounts for less than 2% of international gas production. OGEC would therefore need to be structured in a way that reflects not only current production but also allows for Iran and Qatar to capitalize on their reserve base by ratcheting-up production and market-share over time. Otherwise, any cooperation on price or production levels would at most be a "cessation of competition," quickly recognized by smaller members as an attempt to throttle their revenues and ambitions.
Gazprom may seek such an "armistice" just long enough for the company to build up its capacity and to bring its more challenging fields on stream. Once these investments are in, the long-term scenario suggests high output to be in Russia's best interest, in order to make productive use of its infrastructure and to ensure for itself greater political influence. Investments totaling tens of billions of dollars in projects as diverse as Sakhalin-2 and Shtokman are not being developed to stand idle; Gazprom certainly expects to exercise its diplomatic clout, and to earn a decent return doing it.
Before the formal announcement of the Big Gas Troika, Russia initiated a number of efforts to consolidate the gas market on its own terms. Gazprom actively pursues agreements with national oil and gas companies in order to cooperate on capacity expansion, marketing, and access to export markets. One of its first forays was a March 2006 memorandum of understanding with Sonatrach of Algeria. Sonatrach accounts for 18% of Europe's gas imports and together with Gazprom account for 80% of Europe's gas imports. Notable is the way the Gazprom-Kremlin duopoly leverages military and political power in its energy dealings. Besides the gas arrangement, Putin and Algerian President Bouteflika have discussed Algeria's $4.7 billion Soviet-era debt to Russia and an arms deal. Since then, however, Sonatrach allowed its joint marketing agreement with Gazprom to lapse, and after two months Algiers returned 15 of the fighter planes included in the agreement, claiming quality deficiencies.
The apparent lack of success in Algeria did not dissuade Gazprom from seeking out other partners as a February 2008 agreement between Gazprom Neft (Gazprom's oil production unit) and the Iranian Oil Ministry suggests. Besides committing to joint exploration and production, the two sides also agreed to "cooperation in the transportation, processing and marketing of gas...," a recurring goal of the Russians in their dealing with other energy producing nations. Gazprom's discussions with Bolivia's Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) a month later underscored this strategy. Though the agreement signed on March 18th was limited to Russian participation in exploration activities in the country, in talks with Bolivia's President Evo Morales mention was made of "prospects for bilateral cooperation in the oil and gas area, as well as issues concerning further joint activities."
April 17 2008 saw the signing of yet another joint venture agreement, this one between Gazprom and the National Oil Corporation of Libya. Entered into during then-President Putin's visit to Tripoli, it calls on the two companies to build a cross-Sahara pipeline bringing Nigerian gas to Libya. Also on the agenda were talks on Gazprom's participation in the second stretch of the Green Stream Libya-Italy pipeline. This trans-Mediterranean connector was initially meant to provide Europe with supply diversity, so potential Russian involvement adds to European concerns over energy security.
For Europe, worried about an increasing amount of its gas coming from Russia, such agreements produce fears of a Gazprom "pincer movement," with the Russian monopoly controlling a greater and greater share of gas imported into the EU. With the exception of Bolivia all countries targeted by Gazprom for cooperation in production and marketing are current or potential LNG exporters, as is Egypt, with which Gazprom has held numerous, though thus far unfruitful, meetings. On July 4, 2007, during a visit by Egypt's First Deputy Minister of Petroleum to Gazprom's Moscow headquarters, the discussion focused primarily on joint work on exploration, development, and LNG production and deliveries. More recently the energy ministers of both countries met in Cairo on March 19, 2008, to discuss both nuclear-power cooperation and, to no surprise, "cooperation in energy, [particularly] oil and gas."
