25 Dec 2009 15:43

Gazprom chief: cheap gas slows economic innovation

MOSCOW. Dec 25 (Interfax) - The current gas supply situation in Russia deprives most entrepreneurs of incentives to develop new areas of operations and create innovative products, Gazprom CEO Alexei Miller said on Friday at a meeting of the commission on economic modernization and technological development.

"The difference in price for energy resources, primarily natural gas, on domestic and foreign markets, gives Russian enterprises a distinct competitive advantage and allows them to earn guaranteed revenue from sale of traditional products. There is no incentive at all to create anything new," Miller said.

"A full-scale, quality modernization of Russia's economy, the creation of principally new forms of business that would generate sales profit from knowledge and high-tech production, requires a reduction in the ability to profit off the difference between domestic and foreign energy prices," he said.

"Real competition on the domestic market between fuels is needed. Without it, it will be impossible to achieve the goal of creating a fundamentally new economic structure. Otherwise, there simply won't be any incentive to raise energy efficiency, to organize intelligent production. A new economic structure focused on innovation can only exist under a new structure for the energy balance. The new structure of the fuel and energy balance is inter-fuel competition that current does not exist in the fuel and energy sector," he said.

Gazprom has been designated a "strategic innovator" company. The Gazprom group allocated 11.4 billion rubles to R&D work in 2008 and another 12 billion rubles in the first nine months of 2009. Gazprom is the fifth biggest company in the world in terms of R&D spending.

"We understand full well that growth of innovative potential gives us a whole host of competitive advantages and lays the foundation for the country's future economic stability. At the same time, it is clear that this important area of company operations only stimulates those sectors whose goods and services are used by Gazprom," he said.

"We have research institutes, scientific groups and schools, a venture fund and test facilities, and new developments are being introduced, but formation of a new sector capable of exporting knowledge instead of gas is not taking place. All these science teams, all these supply partners, all depend on demand for gas on the domestic and foreign markets. In the final analysis is all depends on the price of oil, on the price of a barrel," he said.