European Union energy companies court Moscow
Their ties with Kremlin-backed Gazprom are vexing EU efforts to create an energy security policy that would lessen dependence on Russia.
from the June 21, 2007 edition
Page 3 of 3
Political will vs. business goals
One key thing Brussels could do, some experts say, is limit the kind of contracts European energy companies sign. Recent deals with Gazprom lock the firms in for 20 to 25 years. "What Brussels can say is that we don't want to see these kind of [long-term] contracts anymore," says Claudia Kempfert, an energy expert at German Institute for Economic Research.
But political will is up against business interests. Even as national governments try to set an EU policy on Russia – continuing to clash with Moscow over missile defense and the fate of Kosovo – businesses within their borders are dealing directly with Moscow.
Perhaps no country is as divided as Germany. The grand coalition governing the country is split between Chancellor Angela Merkel's Christian Democrats and the Social Democrats loyal to her predecessor, Gerhard Schröder.
Mrs. Merkel, who grew up in the former East Germany and speaks Russian, has taken a harder line against Russia, particularly on human rights abuses. The Social Democrats favor more engagement with Moscow. Mr. Schröder himself is out of politics, but still influential. He heads the German-Russian North Sea pipeline project, and his former chief of staff is now the country's foreign minister.
For seven years Schröder's governemnt urged close business ties between Germany and Russia, particularly the country's energy giants. E.ON now owns stakes in Gazprom worth $17 billion.
"You can't ask private businesses to think politically," says Joerg Himmelreich, an EU expert at the Berlin office of the German Marshall Fund of the United States. "They are under the pressure of daily profits, and they will run after Russian business as long as they get something out of it."
Corporate Europe 'sdealings with Gazprom
As the EU strives to lessen its dependence on Russia for natural gas, European energy companies appear to be working at cross purposes by deepening ties with Russian energy giant Gazprom. A few examples:• E.ON and BASF, two German energy companies, are working with Gazprom to build a $12 billion natural-gas pipeline in the North Sea that could increase Russian deliveries to Germany by 20 percent. In exchange, both companies will get access to Russia's vast Shtokman gas field in the Barents Sea.
• MOL of Hungary, one of the largest energy suppliers in Central Europe, is building a massive underground gas reserve with Gazprom in Hungary, which will be fed with gas from an extension of Gazprom's Blue Stream pipeline.
• Royal Dutch Shell recently sold a 50 percent stake in its giant Sakhalin gas-field project in Russia to Gazprom for a reported $7.45 billion.
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