Assessing the Rationale in Strategic Alliances - Gazprom's Expansion into the Finnish Natural Gas Market*

By Vahtra, Peeter; Lorentz, Harri | Journal for East European Management Studies, October 1, 2005 | Go to article overview

Assessing the Rationale in Strategic Alliances - Gazprom's Expansion into the Finnish Natural Gas Market*


Vahtra, Peeter, Lorentz, Harri, Journal for East European Management Studies


The paper presents a hybrid model for the consideration of organisational governance forms in industrial relationships, which is then utilised in the analysis of a specific case concerning Russian Gazprom's operations in Finland as the sole supplier of natural gas to the Finnish market. Such considerations regarding foreign involvement in strategic industries from a national point of view are of vital importance, as Russian energy companies expand their operations in Europe and other parts of the world. The paper elaborates on Finnish - Russian economic relations in general and provides an outlook on the operation of Gazprom in particular.

Der Aufsatz präsentiert ein Hybridmodell für die Einbeziehung verschiedener Formen van Organisationsführung in industriellen Beziehungen, anhand dessen die Operationen der russischen Gazprom, dem einzigen Erdgaslieferanten in Finnland, analysiert werden. Derartige Erwägungen das ausländische Engagement in strategischen Industrien betreffend, sind aus der nationalen Sicht immens wichtig, da russische Energiekonzerne ihre Operationen nicht nur in Europa ausweiten. Der Aufsatz befasst sich mit den russisch-finnischen Wirtschaftsbeziehungen im allgemeinen und bietet einen Ausblick auf die Operationen van Gazprom im speziellen.

Keywords: Strategic alliances / energy / Russia / FDI / organisational governance

Introduction

The continuing positive economic development in the Russian Federation implicates the strengthening of economic ties and relations with western markets. Improving revenues encourage Russian companies to also seek opportunities outside their home country, even though the native arena cannot be described as one lacking business and investment opportunities for dynamic enterprises endowed with cash. Both sides of the conceptual classification of economic relations are relevant as we analyse the current phenomenon, namely foreign trade and foreign direct investment (FDI). The aspects are undisputedly connected to each other, in a successive or complementary manner. Russian companies are active in both, and importantly, with more elaborate operation methods, both in trade and investments.

The phenomenon under our focus is that of Russian outward foreign direct investment in Finland. There has been extensive media attention towards Russian involvement in Finnish markets, and scholars have forecasted the continuing strengthening process of economic relations between the two countries. According to several estimates, Russia is considered as becoming Finland's most important trading partner as soon as in the year 2005. To complement the picture, we consider it worthwhile to contribute to the discussion with an academic study on Russian companies' operations in Finland through a case study of the largest Russian investment in the Finnish energy sector.

The developments in the Finnish energy sector have shown interesting characteristics during recent years. Finland's increasing dependence on Russian energy supplies, including oil, natural gas, and electricity supplies, has raised heated debate on the current development, and sometimes on an unfortunate populist note. The fact that the Russians have a natural interest towards the Finnish energy sector opens avenues for discussion on the more salient involvement of Russian oil and gas majors in the developing energy scene. We attempt to contribute to this specific area of discussion with a constructive and academic line of thought.

The paper is structured as follows. Firstly, we briefly elaborate on the overall state of Finnish-Russian economic relations, with emphasis on the trade and FDI issues. secondly, we provide short theoretical considerations about relevant strategic alliance issues and construct a framework for the purposes of the case study. We continue by providing an overview of the case companies involved, Russian Gazprom and Finnish Gasum with particular emphasis on Gazprom's foreign activities. …

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