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Russia’s Gazprom is planning 3.5 billion euros worth of price cuts for its European customers this year

The world’s top gas producer is responding to falling demand due to Europe’s economic slump, energy efficiency drives and competition from liquefied natural gas, especially in its main market, Germany.

As a result it is amending long-term contracts with some European clients.

The state-controlled energy firm also vowed to make good on dividend promises despite the hit to its cash flow from the price cuts.

Gazprom’s declining cash flows have called into question its ability to boost dividends while funding vast investment projects, including plans to expand its pipeline export routes that will cost tens of billions of dollars.

Industry analysts say price concessions to the likes of Polish gas monopoly PGNiG, may help Gazprom rebuild its share of the European market, and meet its goal of raising gas exports to Europe by 10 percent this year.

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