Market Power and Long-term Gas Contracts: The Case of Gazprom in Central and Eastern European Gas Markets

We explore a major European competition decision, the 2012-18 Gazprom case, using global gas market simulation model. find that access to LNG markets alone is insufficient counterbalance Gazprom’s strategic behaviour; central and eastern Europe (CEE) needs be well interconnected with bidirectional flow capability. ‘Swap deals’ created by decision facilitate CEE integration, while limiting potential power. Such deals may increase diversity of contracted number players, but do not improve physical supply diversity. In next five years, swap could marginally impact negatively utilization assets in CEE, since commitments expire mid-2026, these fall considerably, especially if withholds supplies. As an unintended consequence, disintegrate from rest Europe. Avoiding such outcomes will require further reforms, particularly, design for transportation.