Comment: It’s time to see through Gazprom

Chirstian Charisius
January 6, 2009

Germany is one of the few countries with leverage over Gazprom. The former Chancellor Gerhard Schroeder has strong links to the Russian company

Roger Boyes, Berlin
The bust-up between Russia and Ukraine that threatens to gum up the gas supplies of much of southern and Eastern Europe hardly comes as a surprise. It is almost part of the New Year ritual and somehow – perhaps Kremlin meteorologists are in on the plot – always seems to strike during a cold spell. Across the continent, radiators run cold.

So why hasn’t the European Union devised some kind of strategy by now to deal with the threat? Years of talk about energy security have generated nothing but hot air.

The fundamental20problem is that the west Europeans, and in particular the Germans, have bought into the myth that Gazprom is a normal commercial concern struggling to succeed in the marketplace.
The European Commission pretends that it is behaving in an even-handed way in the row between Kiev and Moscow. Scratch the skin of a Euro-bureaucrat however and you see soon enough that Brussels is in sympathy with the Gazprom line. Ukraine, you will hear, is chaotically governed, is not a reliable friend to the EU; a gas-thief, no less.
There does not seem much doubt, admittedly, that the feuding between the Ukrainian president, Viktor Yushchenko, and the premier Yuliya Tymoshenko, has sapped Kiev’s bargaining power.
But the fact is that Gazprom is intent on exploiting these divisions; the gas price war is part of its long-game to neutralise Ukraine. Or rather, it is a ploy mounted by those in the Kremlin who dictate Gazprom strategy.
“Gazprom itself is neither good nor bad,” say the Russian authors Valery Panyushkin and Mikhail Sygar, “it is like a Kalashnikov or a Colt that can be used either to intimidate or in defence. Its moral value depends on the intention of the person whose finger is on the trigger.”

In other words, let’s stop talking about Gazprom as a straightforward market player: it is a political weapon.
The key aim of the Kremlin (President Medvedev is a former Gazprom chairman; the Gazprom CEO Alexei Miller was a confidant of Vladimir Putin when he was running St Petersburg) is to stop the EU and Nato expanding to include Georgia and Ukraine. A short war against Georgia discredited its Nato-friendly leadership. Game One to the Kremlin. Ukraine is about to be exposed as a wobbly European ally. Game Two to the Kremlin.

This is not about gas pricing. If it were Moscow could have initiated serious talks about long-term supply contracts rather engaging in annual price wrangles. The Kremlin disrupted supplies after the revolutions in Ukraine and Georgia. It lowers gas tariffs for friendly states like Belarus and Armenia.
In 2006 when a Polish energy company outbid Russian competitors in buying a stake in a Baltic oil refinery, the flow of Russian oil to that refinery stop ped immediately. Due to “technical problems”. Three days after the Czechs signed a missile defence deal with the US, Russian oil flow dropped by 40 per cent. Technical problems again.

If the EU is serious about energy security, it has to diversify away from Russian supplies as fast as it can. And it should demand more transparency from Gazprom. The Germans are best placed to do this.
Eon, the German energy giant, has a 6 per cent stake in Gazprom; not much, but surely enough to make Gazprom management think twice before acting politically. Its heavy dependency on Russia should give Germany clout.

Instead, it co-operates enthusiastically with Gazprom in building a Baltic gas pipeline that bypasses Poland. The former Chancellor Gerhard Schroeder has taken the Gazprom shilling and is quick to defend Kremlin policies. And Gazprom, keen to buy friendship in Germany, is sponsoring the football team Schalke. All of this helps dilute the EU aim of energy security.
As long as Germany’s own supplies are guaranteed, why should it worry about the small fry, the central Europeans currently shivering in the Big Chill?