Europe's Price Vengeance on Gazprom

From the Baltics to the Mediterranean, Russia’s Gazprom has long been the dominant supplier of natural gas to heat homes, run factories, and generate electricity. Even if its European customers grumbled about high prices, they didn’t do it too loudly: Gazprom could cut them off, as Ukraine learned during its price disputes with the company between 2005 and 2010.

A global production boom led by U.S. shale gas has turned the tables. While the U.S. is now awash in cheap gas, Gazprom’s European customers pay about three times the U.S. price. European utilities are demanding—and winning—price concessions that are clobbering Gazprom’s bottom line. On Nov. 2, the company reported second-quarter profits down 50 percent, as discounts to clients reached $4.25 billion so far this year.