The article talks about the Russian energy firm, Gazprom, which enjoys a monopoly position in Russia, producing 86% of the nation's natural gas. Not only has it dabbled in the energy sector, but it has also diversified into other industries, for example financial and media sectors, holding major stakes in 75 such Russian firms, even possessing its own telecommunications network. Thus it is a monopoly - not only in the energy industry, but in fact a monopoly in the Russian economy as a whole as well! Diversification is also one of the internal economies of scale. This is substantiated by the fact that the taxes it pays alone constitutes 25% of Russia's budget.
Being such a large firm, it of course does not limit its investments in Russia alone, owning energy firms and pipelines in various European countries - and 14 countries are entirely dependent upon it for their energy supply. Thus the unique nature of the energy industry allows for 'local monopolisation' despite the entire market itself possessing a oligopolistic structure (Gazprom only controls 17% of world's energy reserves). This occurence is probably due to the energy industry being a natural monopoly in those countries - especially since the markets of those countries are relatively small and high start-up costs are involved.
Thus we can see that Gazprom involves strategic national interests and thus by economic theory, the government would nationalise it, take over it and operate it. But, the scenario here is slightly different. Gazprom is seemingly puppet-owned by the government, and its near-monopoly position is in fact due to the government's deliberate actions. These included: arresting and buying out the "oligarchs" who had seized some control of the raw materials in Russia in the past (when the Soviet Union collapsed) - thus removing competitors to Gazprom, and giving Gazprom greater control over the resources in the country; and awarding Gazprom five new gas exploration concessions recently without any competition, besides forcing the Japanese, Dutch and British who had a concession to develop a gas field in Siberia to give Gazprom a 50% share in their entreprise - thus setting up high artificial barriers to entry for foreign firms trying to penetrate the Russian market and hence ensuring Gazprom's monopoly position.
Thus it seems apparent that Gazprom was made into a monopoly on purpose so as to be utilised as a tool by Russian political leaders - to not only hold control over Russia's economy and establish their power, but also as a bargaining trump card over other countries - the examples in the article being Ukraine and Georgia having their energy supplies cut off when they had disputes with Moscow. This brings the idea of the power (a.ka. evils) of a monopoly to a new level - to the extent of exerting political control over other nations. This is also an interesting scenario whereby the government of a country, instead of seeking to reduce the power of a monopoly by employing the various measures to control it, let it flourish and gain in power, and then utilise its power to exercise political clout on other countries.
Taking a bigger picture into context, we can thus understand why many countries tend to have some nationalistic protections of their economies, limiting the extent of foreign investments in the country so as to protect their national industries. As mentioned above, this is probably due to the fear of having foreign countries or firms controlling too much of their industries or even the economy, giving the foreign countries or firms some degree of influence and power in the country. Very good examples would include the furore over Temasek Holding's purchase of Thailand's largest conglomerate Shincorp in 2006, and the Indonesian court ordering Temasek to sell either its stake in Telkomsel or Indosat (subsidary units of Temasek own 40% and 35% of Telkomsel and Indosat respectively), two national telecommunications companies in Indonesia. This is especially so, given that Temasek is owned by the Singaporean government.
Zhe Wei
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