Russian state energy firm Gazprom is among the most powerful companies in the world. It boasts Russian Deputy Prime Minister Dmitri Medvedev as its chairman and provides one-fourth of all natural gas consumed in Europe. Europe's dependence on Russian natural gas has given Gazprom the opportunity to extend its corporate influence into the Continent, something that has ruffled feathers throughout Europe. European attempts to find alternatives have progressed at a snail's pace simply because all other options are either more expensive or even less attractive than hitching oneself to "the Bear" — and they are certainly all long term. Here's something else that should get Europe's attention: Gazprom is running out of natural gas. Literally. Gazprom's problem is simple. Its investment into bringing new fields on line is absolutely abysmal. As of 2000, only three major fields in Western Siberia — Urengoy, Yamburg and Medvezhye, with reserves of 16 trillion cubic meters of natural gas among them — accounted for about 70 percent of Gazprom's total natural gas production. All are past maturity, and efforts to replace them are middling and lagging. The first major field brought on line since the end of the Cold War — the 3.3-trillion-cubic-meter Zapolyarnoye superfield — only began commercial production in 2001, and its output peaked in 2004. All the low-hanging fruit already has been picked, and Gazprom has not shown the managerial foresight, interest in foreign investment or technical capacity to replace output at a pace that will forestall production declines. The chart below indicates the International Energy Agency estimation of Russia/Gazprom's output decline without a substantial and immediate increase in investment dollars. Most of the increase — the blue region — is likely to come from Kazakhstan and Turkmenistan, and since those increases depend on an improvement of the infrastructure linking Russia to Central Asia, the real picture might even be bleaker. Despite Gazprom's juggernaut mentality and its political and institutional power, the firm must still abide by the laws of physics. Its has not proven capable of capitalizing on its strengths to foster a sustainable production program, and the dead weight of having to supply the subsidized domestic market absorbs roughly two-thirds of Gazprom's output with minimal profits. Gazprom's European contracts are the single largest source of income for both Gazprom and Russia. Ending those exports simply is not an option for the Russian state. So the trick is to do more with less. Gazprom has a three-part plan to (it hopes) forestall this problem. The first and least realistic part involves adjustments Moscow is making to its laws to allow independent players such as LUKoil and Novatek to ship their natural gas production via Gazprom's pipeline monopoly. The catch is that if these firms decide to bypass the subsidized and unprofitable domestic market in favor of the more lucrative export market, they have to "share" their income with Gazprom. So while in theory this would be a great step because it would end Gazprom's export monopoly and encourage greater production, it would likely be left to Gazprom to determine what other firms' access to the international markets would look like. Few are likely to want to play such a game of Russian roulette when it is Gazprom loading the gun. With the exception of some associated natural gas production that for whatever reason cannot be re-injected to assist oil output, few energy firms will focus on natural gas in Russia until Gazprom's monopoly status is revisited (which will happen the day before never). Only the Central Asian states — which for now have no other export options except to ship via Gazprom's network — will put any serious effort into supplying Europe. The second and more feasible part of the plan involves Russia's desire to build nuclear power plants to reduce demand for natural gas to generate electricity at home. Considering Russia's past technological prowess, this should be child's play. However, since the Cold War, only two fresh reactors have been added to the fleet. Regardless of whether the limiting factor is money, technology or managerial skill, putting together a program to substitute for 225 billion cubic meters of natural gas a year (approximately the amount of production declines Gazprom faces) would require an energetic nuclear power program — and Russia's track record at building reactors is anything but. The third and most feasible part of Gazprom's strategy is raising the price of natural gas on the domestic market. This has been proceeding apace at 10 percent or more annual increases per year since 2000 and serves two purposes: It increases Gazprom's income on the domestic market and decreases demand, freeing up more natural gas for export. Put another way, if Gazprom increases natural gas prices so much that Russians cannot buy it, more will be available for export. Taken together, these steps should work to keep Russia's westward natural gas exports stable. The issue for Gazprom is not keeping output stable; it is meeting its export contracts. The price, of course, will be ever-more expensive energy at home. INDIA: India's gross domestic product crossed the trillion-dollar mark for the first time when the rupee appreciated to just below 41 against the U.S. dollar, according to an April 26 report by investment bank Credit Suisse. But investors should be cautiously optimistic about India's growth, as Moody's Investors Services reported that India is showing "classic signs of an overheating economy," with high growth and accelerating inflation. The Indian government's inability to overcome political opposition to privatization and liberalization reforms has resulted in a series of stopgap measures that are proving detrimental to the economy's overall health. The Indian central bank recently released a study that says most factories in the country are operating at full capacity, and that it would take 12-18 months to bring new capacity on line to meet rising consumer demand. As a result, capital inflows have risen substantially; during the first quarter of 2007, foreign investment totaled $11 billion, while overseas borrowing by Indian companies increased to $13 billion. ALGERIA/POLAND: Poland announced April 26 that it will seek to import Algerian liquefied natural gas (LNG) beginning in 2010 as part of a plan to significantly reduce the country's reliance on Russian energy supplies. In January, Poland concluded a cooperation agreement with Algeria's state-run energy firm Sonatrach, under which Poland will receive Algerian LNG at a yet-to-be-built terminal on the Baltic Sea coast. Sonatrach is already Europe's second-largest natural gas supplier next to Russia's Gazprom, fulfilling about 10 percent of EU demand. ZIMBABWE: Inflation in Zimbabwe rose to an annualized rate of 2,200 percent in March, Zimbabwe's Reserve Bank Governor Gideon Gono said April 26. The release of the March figure, which is up 500 percent from the previous month, is expected to inspire further criticism against the government of President Robert Mugabe. Mugabe is facing leadership rivals within his Zimbabwe African National Union-Patriotic Front party who want to succeed him, along with considerable popular pressure from opposition political parties and civil society groups demanding that the government redress the country's failing economy and social services. CHINA/ETHIOPIA: Some 200 gunmen attacked a Chinese energy exploration facility in eastern Ethiopia on April 24, killing nine Chinese workers and kidnapping seven. The energy facility is part of the Chinese Zhongyuan Petroleum Exploration Bureau, a division of Chinese state-owned oil major China Petroleum and Chemical Corp. (Sinopec) and a key component of China's international energy initiatives, with operations in 14 countries. The perpetrators, who are believed to be part of the Ogaden National Liberation Front, carefully planned and coordinated the attack. Complaints have arisen across southern Africa that China is growing too ambitious and influential in domestic politics and too greedy in stripping Africa of its natural resources. Coming on the heels of a string of attacks against Chinese interests in Africa and rising African concerns about Chinese activities, the incident in Ethiopia will force Beijing to rethink its involvement and investment security in Africa. BRAZIL/ARGENTINA/BOLIVIA: After announcing April 20 that it would reduce natural gas exports to Argentina and Brazil, the Bolivian government resumed export operations at normal levels by noon local time April 21. The planned disruption in services was an emergency measure due to damage to a regional natural gas pipeline caused by protests between rival provinces over ownership of the Margarita natural gas field in the Tarija department. The government had placed natural gas operations under military protection April 16, but protesters overran the facilities and military forces did not expel the protesters and secure the facilities until April 20. Bolivia stood to lose $980,000 daily if exports had been reduced as planned — a reduction of 75 percent to Argentina and up to 20 percent to Brazil. The government intends to fine both feuding provinces for the damages caused to facilities. It remains to be seen whether that action will discourage similar activity in the future. Meanwhile, Brazilian President Luiz Inacio "Lula" da Silva is set to meet with his Argentine counterpart, Nestor Kirchner, on April 27; the two will likely discuss how to collaborate to ensure consistent natural gas supply to both countries despite Bolivia's instability. RUSSIA: The lower house of the Russian parliament passed a bill April 20 to create a federal bank for foreign trade and development, intended to finance investment projects in key economic sectors. The new development bank will help Russian companies implement large-scale economic projects and insure export loans against political and commercial risks. The bank will have charter capital of $2.72 billion by the end of 2007 and own assets worth $3.88 billion. The creation of a development bank is Russia's latest attempt to help spur economic growth, while the bank's management structure ensures that Russian President Vladimir Putin — or Putin's successor — will maintain control over its activities.