The Russian Gas Sector

In Michael Alexeev and Shlomo Weber (eds), The Oxford Handbook of the Russian Economy. New York, Oxford University Press, 2013, pp. 363-382.

The institutional structure of the sector evolved as a consequence of natural conditions as well as the principles of the centrally planned economy. The industry was transformed to one company in the 1990s while retaining many of the characteristics of the previous state structure. An important issue is how the company Gazprom continued to play a vital economic and social role for the government and in exchange was granted extensive monopoly privileges. The low pricing of gas is closely connected to the social and economic role gas has played, but by using gas to subsidize other parts of the economy, the government has left the gas industry under-financed for years. There are efforts to raise prices but the impact of price increases is uncertain due to the monopolized sector structure. This discussion is closely connected to gas sector reform. Comprehensive reform has been proposed, but always rejected. Nevertheless cost increases and the state’s revenue needs are drivers for change. There are increasing contradictions between developments in the resource base and the structure of the industry.