De facto Axis

Russia's export monopoly Gazprom is already the largest natural gas producer in the world and will become the largest supplier of energy on earth with its planned acquisitions of further energy sectors. With the upcoming acquisition of the state oil developer Rosneft, Gazprom will control the known reserves of 117.7 billion barrels of oil equivalent, an accounting unit which combines oil and gas. Exxon Mobil which holds second place only controls 21.2 billion barrels. Gazprom is also considered the most likely buyer of Yuganskneftegaz, the subsidiary of the weakened oil company Yukos.

Preferred Partner

The Russian state will hold 51 percent of the shares - up to now it has held 38.37 percent, therefore foreign investors will be able to invest in the remaining 49 percent. Until now purchase of Gazprom shares was extremely difficult for foreigners and foreign ownership was limited to 20 percent. The opening offers good opportunities for German companies whose direct and indirect influence is already considerable. The Eon subsidiary Ruhrgas is the largest foreign investor with 6.5 percent, planning further purchases of shares. Ruhrgas is also the only foreign investor with a seat on the board of Gazprom, and many managers of Gazprom had been trained by Ruhrgas in Germany. Currently, the two cooperating companies have agreed on the expeditious expansion of strategic projects. ¹⁾Another German partner of Gazprom is the BASF-subsidiary Wintershall AG. Both operate the joint venture Wingas and the German-Russian joint venture Achimgaz. ²⁾Finally, the Deutsche Bank just granted Gazprom a credit for over 200 million US dollars, to be followed by a further one. ³⁾The German financial institution had already participated in the Eurobond placement of the Russian energy corporation. The Russian investment bank, United Financial Group, in which the Deutsche Bank participates, holds 6.9 percent of Gazprom shares for its clients.

Eon as a Model

With the expansion of German participation in Gazprom, the influence of western competitors on Russian business is diminishing. Thus, TNK-BP, in which Britain is a participant, must be satisfied with the role of junior partner in the gigantic Kovykta gas project in Siberia, because Gazprom is becoming its majority shareholder. In the future, additional new Russian oil and gas projects shall be accessible only to foreign companies if they include Gazprom or Rosneft. The Dutch-British Shell corporation is under pressure to allow Gazprom participation in its development, which is worth billions and located on the Russian Pacific island Sachalin. In addition, Gazprom attempts to regain control of independent gas producers like Northgaz and to expand in the Russian energy business. Gazprom owns 10.6 percent of the state energy monopoly United Energy Systems (UES) while it is, at the same time, its most important supplier. The corporation also acquired, presumably as a vetoing stock, a ,,significant share package"of Russia's biggest regional supplier, Mosenergo. Thus, the corporation, based on the three pillars of oil, gas and electricity, follows the strategy of controlling the complete chain of production to the final consumer. A representative of Gazprom explains that ,,such big European energy corporations like Eon"serve as models for Gazprom's corporate structure. ⁴⁾

Front Row

The return of the Russian energy business into state ownership invalidates strategies which had tied political hopes to the deregulation of Moscow's market of resources. Thus the acquisition of gas, electricity and oil companies by western private owners was to diminish the material basis of Russian central power. During the past decade political advisors of the USA and Great Britain had been betting on that card and, thus, had considered any improvement of their influence on the disintegrating Russian state apparatus as obsolete. Berlin, assessing this development very differently, retained its ties which had been upheld since the agreements between the Kohl and Gorbachev governments. The centers of these connections are the foreign policy ministries of the two states. Thus Berlin is in the front row of western partners, since the current Russian president strives to improve Moscow's central power while de facto nationalizing its material bastion, the energy industry.

Warnings

Free of competition, Germany's foreign and energy policies are leading to disputes with European competitors as well as with transatlantic strategies concerning Russia. Thus the quasi-official Berlin ,,Stiftung Wissenschaft und Politik"(SWP or science and policy foundation) states that strategic partnership with Moscow's central power might be ,,little more than an opportunistic intermezzo."Instead the option of economic deregulation and territorial easing should remain open for ( ,,improvement of the forces in Russia which are oriented toward a liberal constitutional state"). ⁵⁾The open letter by several politicians, scientists and intellectuals to the heads of government of the European Union and NATO pursues a similar thrust. Among the signatories are, in addition to others, the former Italian heads of state Amato and D'Alema, the former Swedish prime minister, Bildt, numerous East European politicians, like the former Czech president, Havel, as well as the former foreign ministers Bartoszewski (Poland) and Ilves (Estonia). The East European signatories represent national currents which warn of a resurrection of the German-Russian axis and the hundred year old history of hegemony of those two big powers.

Preferred

German politicians with transatlantic priorities use these warnings to promote more common interests with Washington, using Eastern Europe as a detour. Thus, Friedbert Pflueger (CDU) stated that Berlin forges ,,over the heads of the young democracies in central and eastern Europe"a ,,de facto axis of Paris, Berlin, and Moscow."Erler, foreign policy representative of the SPD, called the public warnings an ,,aggressive attack"which is directed at Berlin's Ostpolitik or eastern policy and must be rejected. ⁶⁾Chancellor Schroeder also emphasizes the direction of German strategy for Russia which rests on privileged relations with Russia's central power and its control of resources. ,,Especially in the energy sector, Germany's economy"is to be considered ,,a preferential partner of Russia"and, thus, would continue to influence exploration and distribution of resources. ⁷⁾

1) Kooperationsgespraeche Eon-Gazprom laufen gut; Frankfurter Allgemeine Zeitung 09.10.2004. See also Strategic Projects (II)
2) OAO GAZPROM und BASF AG erarbeiten Grundsatzabkommen zur Zusammenarbeit beim Achimov-Projekt; www.news-ticker.org 30.09.2004. See also BASF: Access to the largest energy reserves of the worldand A powerful presence in the British energy market
3) Deutsche Bank gewaehrte Gasprom Millionenkredit; www.russlandonline.ru 08.10.2004
4) Gazprom wird zum Energiemulti; Die Welt 11.10.2004.
5) Russland ohne Demokratie. Konsequenzen fuer das Land und die europaeische Politik; SWP-Studie 2004/S 38, Oktober 2004
6) ,,Russland einen Schritt naeher an autoritaerem Regime". Offener Brief an westliche Staatschefs; Frankfurter Allgemeine Zeitung 30.09.2004
7) Schroeder stellt sich hinter Putin. ,,Ich habe nicht die Absicht, die Russland-Politik zu aendern"; Sueddeutsche Zeitung 02.10.2004

see also Background Report: German ,,Geopolitics"and the Struggle for Energy Sources

Sources:
Russland formt staatlichen Energiegiganten; Die Welt 16.09.2004
Russlands Erdoel- und Gassektor im Spagat?; Neue Zuercher Zeitung 24.09.2004
Russland greift auf Industrie zu; Handelsblatt 29.09.2004
Investoren bei Gazprom in den Startloechern; Die Welt 29.09.2004
Wettlauf um russische Energiekonzerne; Handelsblatt 30.09.2004
Die Kreml AG; Die Welt 30.09.2004
Gazprom und die Deutschen; Die Welt 30.09.2004
,,Ein kontraproduktiver Brief"; tageszeitung 30.09.2004