“Against stupidity, the Gods themselves contend in vain.” — Schiller
So Serbia’s government has agreed to sell its oil and gas company, NIS, to Russia’s Gazprom.
By itself there’s nothing wrong with this. What’s stupid about it is the price. NIS has a market value of around $2.8 billion. The government is selling it to Gazprom for $400 million, plus the promise of another $500 million in investment over the next five years. In other words, Gazprom — a company not exactly strapped for cash — is getting a windfall of almost $2 billion, at the expense of one of the poorest countries in Europe.
Why is the Serbian government doing this? Several reasons, all of them bad. Continue reading →
As was indicated yesterday, Russia related concerns are central. The FT comments:
Russia supplies a quarter of Europeâ€™s gas needs and the Unionâ€™s dependence on the country for energy was illustrated in January when a dispute between Moscow and Kiev disrupted gas deliveries to the EU.
The major changes taking shape in Europeâ€™s energy sector at present undercut the arguments of those who have long been predicting a gradual break-up of monopolies and the disappearance of the industryâ€™s biggest players. The planned merger of Suez and Gaz de France to counter an offensive by Enel and Veolia and the fight between Gas Natural and E.On for the hand of Endesa make it abundantly clear that concentration remains very much a watchword in the branch and that even powerful old public monopolies like Electricite de France could be forced into marriages with others in future.
None of the reasons trotted out to justify the merger between Suez and Gaz de France, to cite but that operation, dwelled on the future role of Russia in Europeâ€™s energy landscape. True, the Russians arenâ€™t directly involved in any of the operations underway in Western Europe. On further examination, however, Gazpromâ€™s moves in recent months could be seen as justification for the consolidation.
The future Suez/Gaz de France grouping will become the leading buyer and the top supplier of gas in Europe. As such, it will rank as one of Gazpromâ€™s prime customers in the world. That, however, isnâ€™t necessarily good news for Gazprom. In its dealings with such a powerful client the Russian monopoly wonâ€™t be able to exert as much pressure upon it as upon a smaller entity, let alone bully it.
Expanding on (and slightly copying) my comments in Edward’s post below, I was really shocked to see the spin in the western coverage of the Ukrainian gas crisis. The part that didn’t shock me – just made me groan – is the spin of a western press that seems to have decided in advance that Russia must be the bad guy, so Ukraine must be the good guy. Russia may be the bad guy, but I don’t think is Ukraine is the good guy. From what I can tell from the press, Russian claims that Ukraine was siphoning off gas seem well founded – Russia had been complaining since summer about siphoning, Gazprom was willing to let third parties audit the difference between what was going into Ukraine and what was coming out, while Ukraine refused. Also, it seems that the Russians weren’t the only ones making allegations about siphoning. Yes, Russia’s intentions towards Ukraine are not honorable, nor is this some purely commercial conflict free of political meaning. But, that does not exclude the prospect that Ukraine was screwing Russia.
But what really surprised me was the claim that Russia was the loser here. Continue reading →
If there’s one mystery trumping all the others in the recent Russian-Ukrainian gas supply row, it is the one concerning the role and intentions of the Kremlin, particularly with respect to Vladimir Putin: Why fight a public battle over an issue that is almost as intransparent and complicated as the geological processes that created the gas in the first place? Veronica Khokhlova is trying to make some sense of the deal –
On the surface, it’s all clear and nice: they’ve reached an agreement, and we aren’t paying what Gazprom initially wanted us to pay. Europe can relax, too. But … it’s a complex deal. The Reuters piece [she cites on her blog] doesn’t mention Rosukrenergo as part of the scheme, an intermediary company that will be buying Russian gas from Gazprom for $230 and then selling both Russian and Turkmen gas to Naftogas for $95. A Gazprom affiliate and Austriaâ€™s Raiffeisen Investment AG own 50/50 stakes in Rosukrenergo, which, in a way, means that Gazprom will be buying gas from itself. Rosukrenergo is registered in Switzedrland, and Raiffeisen Investment AG has, allegedly, nothing to do with Raiffeisen Bank. Oleksandr Turchynov, former head of SBU and Yulia Tymoshenko’s man, launched an investigation into Rosukrenergo in summer 2005, but was not allowed to finish it.”
And Jerome at Eurotrib keeps arguing that all this is (simply) a matter of oligarchic infighting at the expense of the peoples involved (as they are paying significatnly higher energy prices than those paid by their countries/oligarchs energy corporations).
Be that as it may – the real question at hand is, as I see it, the following: did Russia/Putin want to appear weak in this matter, demonstrating to the west that he needs to do in Russia what he deems necessary (remember Yukos, the NGO law), or is the Kremlin/Putin indeed so weak that it has to accept oligarchic infighting to the extent of creating a foreign policy crisis, and that, as a result, the Kremlin needs to tighten its grip? Quite frankly, neither alternative is likely to make anyone happy.
It was the late AJP Taylor who suggested that the efficient (or proximate) cause of the first world war was to be found in the the way the national railway timetables had been drawn up. Without wishing to take issue with Taylor (either for or against), it does occur to me that a certain amount of light may be thrown on the otherwise puzzling decision of Gazprom to throw the tap by taking a quick look through looking the election timetables of all the key players (in both Eastern and Western Europe). I was put in mind of this point by the following opening gambit in what is in fact a very interesting and to the point article in today’s FT:
“Russiaâ€™s row with Ukraine has triggered fresh concern over the security of Europeâ€™s energy supplies and some see nuclear power as the biggest beneficiary.”
Nuclear power, hmmmm. I hadn’t thought enough about this point when I knee-jerked my response yesterday. Continue reading →
EU unilaterally blocking Russia’s entry into the very very multilateral WTO.
How many poles is this multipolar thing going to have, anyway?
Putin Doesn’t Like EU Terms for Entry
October 9, 2003
By Natalya Shurmina
YEKATERINBURG, Russia (Reuters) – President Vladimir Putin sharply
criticized European Union “bureaucrats” on Thursday for pressing the
country to raise domestic energy prices as a condition for joining the
World Trade Organization.
“We cannot move to world energy prices in a single day. It will ruin the
country’s economy. Eurobureaucrats either do not understand this or are
trying to impose conditions which are unacceptable for Russia’s entry to
WTO,” Putin told a Russian-German summit meeting in the Urals.
“Such a tough position toward Russia is unjustified and dishonest. We view
this as an attempt at arm-twisting.” Continue reading →