Dangerous Frictions

Bargain Hunter

The Siemens AG has, so far, not been hit by the global economic crisis. At yesterday's shareholders' meeting, the corporation announced a 20 per cent rise in operating profit to reach more than 2 billion Euros in the first quarter of fiscal 2009. Also in the crisis year 2009, Siemens expects a further increase, or, at worst, a small drop in sales. Siemens' ambitious objective: it's sales volume should grow twice the rate of the global economy.[1] In addition, as with other German corporations, Siemens seeks to use the crisis for expansion, and to "shop for bargains". The management is expecting that the financial crisis will lower the costs of potential take-over targets.[2]

Nuclear Renaissance

To maintain its growth rate, Siemens, on the one hand, is concentrating on trade in environmental technology, ascribed to be a very promising venture.[3] And on the other, the company is basically maintaining its nuclear energy business. The chairman of the board, Peter Loescher speaks of a "Renaissance of nuclear power" and explains that it is part of the "energy cocktail of the future."[4] This corresponds to the attitude of German energy companies, which, in spite of domestically phasing out nuclear power, are still anxious to continue building and managing nuclear power plants abroad - because of the triple-digit profit margin.[5] In many executive suites, the international market for nuclear technology is considered to be a very promising business, because, by 2030, more than 400 new nuclear power plants are due to be built around the world.

"Call" and "Put"

In 2001, the company integrated its nuclear activities into the German-French joint enterprise, AREVA NP ("AREVA Nuclear Power") which currently, with its 17,300 employees, is among the world's leading producers of nuclear power plants. Siemens obtained a 34 percent blocking minority, but, from the very beginning, was not satisfied. A partnership in the French AREVA mother company was not to be obtained. AREVA makes its profits from the much more lucrative supply of nuclear fuel rods. All efforts, even to enhance its number of shares, and thereby also German nuclear influence, were blocked by Paris over the past few years. The French side has even announced, under vehement protest from the German side, its intention to buy a "call" option, i.e. buying out the Germans a few years from now.[6] But Siemens pre-empted the "call," and announced Monday, it was taking advantage of its "put" option, following a decision to this effect by its board of directors. This means that the AREVA NP joint venture is being canceled and the 34 percent of the shares, estimated at 2.1 billion Euros, will be sold.[7]

New Alliance

Siemens has no intentions of reducing its nuclear energy activities, following the break-up of the German-French nuclear courtship, but rather to enhance it and therefore seek a change of partners. A prospective candidate for nuclear cooperation, is the Russian Atomenergoprom state holding, which consolidates the enterprises of Russia's civil nuclear power industry. Founded in 2007, the holding covers the entire spectrum of nuclear power production, from nuclear research, to uranium mining, uranium enrichment, the construction and management of nuclear power plants to the storing of nuclear waste. Siemens is seeking a particularly close cooperation. Unlike with the French-German cooperation, in the Russian-German alliance, the German company will also be a partner in the operative leadership.[8]

Potentials

In Berlin the change of partners is being greeted with basic approval. The coordinator of energy policy for the conservative CDU/CSU parliamentary group in the Bundestag, Joachim Pfeiffer, declared that "politics must have an interest in Siemens maintaining and expanding its competence in nuclear energy, to be able to play a significant role on the world market." Like renewable energy, nuclear energy is among the world's growth sector, involving enormous sales and employment potentials. Siemens brushes off misgivings about an alliance with a Russian enterprise. There has already been a very good experience with the Power Machines joint enterprise.[9] Despite a veto from the Russian cartel administration, the German company has bought into the Russian Power Machines turbine producer, which also produces important components for nuclear submarines and the arms industry, and has even taken over the technical direction.[10]

Transatlantic Differences

Following the most recent talks on the upgrading of the German-Russian natural gas cooperation, the German-Russian "modernization partnership," called into being last year, is being intensely promoted through a nuclear alliance.[11] But this could be cause for serious conflicts with the administration of the newly elected US President, Barack Obama. The Russia offensive of German companies had already been a source of difficulties under the Bush administration. The expansion to the US, by the German-French arms corporation, EADS, was thwarted because of its Russian shares.[12]

Unpleasant

As a matter of fact, immediately following the announcement of plans for a German-Russian nuclear alliance, a prominent US policy advisor - the executive director of the Transatlantic Academy in Washington, a think tank sponsored by German and US American institutions - published a signed article in the highly influential Frankfurter Allgemeine Zeitung, warning Berlin against getting too close to Moscow, and attempting to take a middle-of-the-road position between Moscow and Washington. In relationship to Russia, he writes, making allusion to Germany's old seesaw policy, "there are real differences between Berlin and Washington in interests, political cultures and methods. These differences could lead to dangerous frictions, if they are not handled adroitly. The author warned therefore that both capitals should be aware that "the Russian thing could become unpleasant."[13]

[1] Siemens gibt den Krisen-Supermann; Handelsblatt 27.01.2009
[2] Siemens bereitet sich auf Schnäppchenkäufe vor; Financial Times Deutschland 08.12.2008. See also Mehr Geld in der Kasse
[3] Siemens setzt auf Umwelttechnik; WirtschaftsWoche 26.01.2009. See also Industry of the Future
[4] Siemens verfolgt falsche Unternehmensstrategie; Pressemitteilung Nr. 4/2009 des Dachverbands der Kritischen Aktionärinnen und Aktionäre
[5] see also Nukleare Optionen
[6] see also Konfrontationskurs
[7] Siemens beendet Atombündnis mit Areva; Handelsblatt 27.01.2009
[8] Siemens sucht mit russischer Hilfe eine Zukunft für Kernkraftwerke; Frankfurter Allgemeine Zeitung 24.01.2009
[9] Siemens beendet Atombündnis mit Areva; Handelsblatt 27.01.2009
[10] see also Tauziehen and Durch die Hintertür
[11] see also Eurasien und Natürliche Modernisierungspartner
[12] see also Krieg and Irritationen
[13] Stephen Szabo: Für Obama liegt ein Schlüssel zu Russland in Berlin; Frankfurter Allgemeine Zeitung 26.01.2009