Market power
Market power is the ability for a firm to gain control over its demand curve where the firm “owns” all or part of the market. The Economic Moat, which refers to how likely a company is to keep competitors at bay, contributes to market power (Morning Star, N.d.). Aside from being one of the largest corporations in the world, Gazprom JSC (Join-Stock Company) is Russia’s largest and most influential energy company employing close to 400,000 people globally and supplying between 17-20% of the world’s natural gas. Its major business lines are extraction, production, transportation and sales of gas, petroleum and other petrochemicals. Their large gas transmission network, has allowed them to sell consumers in Russia more than half of their overall production (74%), and to export to more than 30 countries (14%), making them a reliable supplier to consumers. Gazprom’s operational output accounts for almost 10% of the entire GDP for the Russian economy.
Russia’s Gazprom has established a number of economic barriers for other companies wishing to compete in the former soviet republic’s natural gas business. Gas lines are an essential requirement to transport the gas from one remote region to another. Considering that Gazprom possesses the largest gas transport system in the world, any company wishing to compete in the Russian natural gas business would either have to build new lines or lease the lines from Gazprom. However, building new gas trunk lines are difficult to accomplish as the Russian government will limit the permits for new lines that compete against Gazprom and leasing the lines would be extremely expensive and cost inefficient for other companies.
Access to natural gas wells is yet another barrier to entry for this monopoly. The Russian government provides Gazprom specific access to key fields in various choice locations such as “The Yamal Peninsula,” that other competitors would not have access to. This action is part of the overall strategy of the
Russia’s Gazprom has established a number of economic barriers for other companies wishing to compete in the former soviet republic’s natural gas business. Gas lines are an essential requirement to transport the gas from one remote region to another. Considering that Gazprom possesses the largest gas transport system in the world, any company wishing to compete in the Russian natural gas business would either have to build new lines or lease the lines from Gazprom. However, building new gas trunk lines are difficult to accomplish as the Russian government will limit the permits for new lines that compete against Gazprom and leasing the lines would be extremely expensive and cost inefficient for other companies.
Access to natural gas wells is yet another barrier to entry for this monopoly. The Russian government provides Gazprom specific access to key fields in various choice locations such as “The Yamal Peninsula,” that other competitors would not have access to. This action is part of the overall strategy of the
References: Aslund, Anders. “Why Gazprom Resembles a Crime Syndicate.” The Moscow Times, February 28, 2012. “Beneath the Hyprocrisy, Putin Is vlnerable. Here’s where His Soft spots Are” by Timothy Snyder, March 1, 2014 http://www.newrepublic.com/article/116812/how-europe-should-respond-russian-intervention-ukraine Belton, Catherine; Barker, Alex; Chaffin, Joshua. “Kremlin Shields Gazprom From EU Probe.” Financial Times. September 11, 2012. "Duma approves Gazprom export bill", BBC News, 5 July 2006. "Gazprom - A Troubled Giant". Radio Liberty. Retrieved 14 September 2012. “Gazprom and Russian energy politics” by Nathan Smith, http://www.nbr.co.nz/article/gazprom-and-russian-energy-politics-ns-128287 Gazprom in Figures 2007-2011 Factbook. "Gazprom in Figures 2007-2011". Gazprom. Goldmann, Marshall (2008), Petrostate: Putin, Power and the New Russia, Oxford University Press, ISBN 978-0-19-534073-0