Institutional trends in Russia's oil and gas sectors

Abstract

This article analyses Russia’s institutional dynamics in the hydrocarbon sectors. Both the oil and gas sectors have experienced a certain degree of decentralization, which has been accompanied by a weakening role of the State. This comparison aims to demonstrate that Russia’s oil and gas industries are significantly different in spite of their post-command economy similarities. The opposing institutional trends are related to different centralization–decentralization dynamics, which reflect an ever-changing interrelation between a State and market forces. At the beginning of transition to a market economy, the oil sector was almost entirely privatized and restructured, unlike the gas sector. Since 2003 a market concentration of the oil sector has taken place, with the creation of a national oil company, Rosneft. At the same time, since 2009, the gas monopoly has been under pressure from both domestic and international (mostly European) markets. Likewise, Rosneft has been able to diversify its exports to Asia-Pacific, whereas Gazprom has failed to agree a gas deal with China. Consequently, Rosneft is gaining importance, whereas Gazprom is softening its position in the gas sector, which also creates grounds for (at least a partial) demonopolization of gas exports from Russia.