Developing a New Market for Russian Gas: Policy Implications from Studying the Dutch Experience

Russia is the largest natural gas reserves holder in the world, with 43.3 trillion cubic meters (tcm) accounting for 23 percent of world’s proved reserves. Russia produces about 10-11.5 percent of world total primary energy supply (TPES), which is five-times more than its share in world population and GDP. This appears to be indicative of a position of economic strength, but at the same time this means that Russia is susceptible to the overall dependence of its economy on the profits for export of energy resources. The phenomenon of the dependence on exports of raw materials is well-known. It can be referred to as the Dutch disease, or more narrowly, a resource curse. It can be argued that Russia is now suffering from such a problem. The purpose of this paper is to look at the new trends in Russian energy policy, and particularly export routes diversification efforts, and examine whether some problems that appeared in Europe can be avoided on the Asian front. In this respect an interesting analogy can be made with gas exports from the Netherlands in the 1960s and 70s, which marked a start of European gas market integration. The objective of this paper is study the experiences of the Netherlands in establishing the rules of the game in an embryonic market and examine to what extent this experience can logically be used by Russia in the East.