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The case for restructuring Gazprom becomes ever more urgent. Russia's gas producer is engaged in its favourite winter pastime – ganging up on Ukraine. It has handed Kiev a bill for $7-billion (U.S.) for failing to import an agreed amount of gas in 2012. The move is typical of Gazprom's all-or-nothing view of the world. The context, though, is intriguing. Ukraine signed a deal last week with Shell to develop the country's shale gas resources with a view to ending its dependence on Russia. Moscow should take the hint.

Gazprom remains a mighty empire. It accounts for 16 per cent of world gas production and supplies at least a quarter of western Europe's gas imports. But its export markets are under pressure. The volume of gas sold to Europe in the first nine months of 2012 fell 3 per cent on a year earlier, according to Gazprom's latest results; net sales of gas to former Soviet-bloc countries fell 16 per cent. Ukraine imported a quarter less gas last year than in 2011 (hence the dispute), partly because its steel industry is shifting to coal. Further pressure may be expected in 2013 as European gas importers such as Gaz de France begin price negotiations.

The squeeze on Gazprom's export markets is bound to reverberate upstream. It spends $40-billion a year on capital expenditure to expand and maintain its pipeline and gas field network (Morgan Stanley expects capex to reach $440-billion in 2013). True, net operating cash was an impressive $33-billion in the first nine months of 2012, but execution and cost overrun risks are inherent in that scale of capex, and if revenues and operating profit remain under pressure, it may need to be curtailed.

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The EU would love to see an end to Gazprom's export monopoly. Russian Prime Minister Dmitry Medvedev thinks that could happen if it makes financial sense. If its export markets continue to shrink, that moment may not be too far off.

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