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==Russian companies==
==Gazprom==
{{main|Gazprom|List of Gazprom's subsidiaries}} {{main|Gazprom|List of Gazprom's subsidiaries|Transneft}}


] is the Russian state-owned energy company that exports gas to Europe. ] is the Russian state-owned energy company that exports gas to Europe. It also controls a ], including key infrastructure assets. ] is another important company in Russia's energy dominance.

It controls a ], including key infrastructure assets.


The purpose of some companies is unclear. An U.S. Senate testimony noted that "Gazprom, with the silent support of the Kremlin has set up 50 or so middlemen companies, silently linked to Gazprom and scattered throughout Europe - such as the ] and the ] network - which do not add any value to the price of Russian gas being sold on European markets; yet they earn enormous sums of money which appears to simply vanish through shell companies in Cyprus and in Lichtenstein."<ref>, June 12, 2008</ref> The purpose of some companies is unclear. An U.S. Senate testimony noted that "Gazprom, with the silent support of the Kremlin has set up 50 or so middlemen companies, silently linked to Gazprom and scattered throughout Europe - such as the ] and the ] network - which do not add any value to the price of Russian gas being sold on European markets; yet they earn enormous sums of money which appears to simply vanish through shell companies in Cyprus and in Lichtenstein."<ref>, June 12, 2008</ref>


A paper noted that Russian firms have demanded foreign joint venture partners to agree to funnel profits through offshore accounts and well-known havens for "confidential funds" or to intermediary firms that bring no added value to the venture.<ref name="divideanddominate"/> Money laundering is used in "backdoor financing" for companies that want to conceal their Russian links and for key individuals in the West who hide the origin of their "consulting fees".<ref name="divideanddominate"/> A paper noted that Russian firms have demanded foreign joint venture partners to agree to funnel profits through ] and well-known havens for "confidential funds" or to intermediary firms that bring no added value to the venture.<ref name="divideanddominate"/> Money laundering is used in "backdoor financing" for companies that want to conceal their Russian links and for key individuals in the West who hide the origin of their "consulting fees".<ref name="divideanddominate"/>


==Russia's tactics== ==Russia's tactics==
According to Ariel Cohen's paper "Europe's Strategic Dependence on Russian Energy" (2007):
* ''Locking in Demand'' - Moscow is attempting to use long-term contracts with European countries to lock in demand. By dealing separately with countries rather than as a group, Moscow can discriminate countries on prices.<ref name="cohen"/>
* ''Locking in Supply'' - Moscow attempts to consolidate its control of strategic energy infrastructure throughout Europe and Eurasia, including supply, sale, and distribution of natural gas as well as as pipelines, refineries, electric grids, and ports.<ref name="cohen"/>
* ''Derailing Competition'' - For example, Moscow has pushed ] which competes against the EU's ] as well as the proposed extension of the EU-backed ].<ref name="cohen"/>
* ''External Consolidation'' - Moscow is consolidating control of supply outside Russia, particularly by signing long-term exploration and supply agreements with Turkmenistan, Uzbekistan, and Kazakhstan.<ref name="cohen"/>
* ''Internal Consolidation'' - Moscow is consolidating Russia's oil and gas sector in the hands of state-controlled entities. Major international entities are pushed out of Russia.<ref name="cohen"/>
* ''A Gas OPEC'' - Russia is "stealthily and steadily" developing a "gas ]" ] to control the output and price of gas. The cartel would include major producers, including Argentina, Bolivia, Venezuela, Iran, and Qatar.<ref name="cohen"/>

Moscow signed the ] in 1997, but it has refused to implement it.<ref name="divideanddominate"/>

===Creating and cultivating interests groups=== ===Creating and cultivating interests groups===
The Kremlin has systematically created or cultivated "friendly" interest groups in both Central and Western Europe who "benefit financially from their formal and informal ties to Russian state energy companies".<ref name="divideanddominate">{{cite book | url=http://csis.org/files/media/csis/pubs/081024_smith_russiaeuroenergy_web.pdf | title=Russia and European Energy Security - Divide and Dominate] | author=Keith C. Smith | date=October 2008}}</ref> The Kremlin has systematically created or cultivated "friendly" interest groups in both Central and Western Europe who "benefit financially from their formal and informal ties to Russian state energy companies".<ref name="divideanddominate">{{cite book | url=http://csis.org/files/media/csis/pubs/081024_smith_russiaeuroenergy_web.pdf | title=Russia and European Energy Security - Divide and Dominate] | author=Keith C. Smith | date=October 2008}}</ref>


For instance, in Germany, the ] believes in a Russia-friendly policy which it calls "Ostpolitik", "cooperative energy security policy", and "strategic partnership". The leadership of SDP has widely documented ties with Kremlin and ], including posts at company boards or party donations.<ref> Stern 20. November 2007</ref> ]'s case is well-known by the public. In Sweden, the police is investigating a bribery case related to ].<ref name=local190209> In Germany, the ] believes in a Russia-friendly policy which it calls "Ostpolitik", "cooperative energy security policy", and "strategic partnership". The leadership of SDP has widely documented ties with Kremlin and ], including posts at company boards or party donations.<ref> Stern 20. November 2007</ref> ]'s case is well-known by the public.
In Sweden, the Swedish prosecutor's office began to investigate a bribery case in early 2009.<ref name=local190209>
{{cite news {{cite news
| publisher= The Local | publisher= The Local
Line 44: Line 54:
| date = 2009-02-19 | date = 2009-02-19
| accessdate=2009-04-19}} | accessdate=2009-04-19}}
</ref> Gazprom's subsidiary ] has hired several former high-ranked officials in Sweden.<ref name=stockholm160209> </ref> Swedish TV 4 also revealed that Gazprom's subsidiary ] has hired several former Swedish officials.<ref name=stockholm160209>
{{cite news {{cite news
| publisher= The Local | publisher= The Local
Line 52: Line 62:
| date = 2009-02-16 | date = 2009-02-16
| accessdate=2009-04-19}} | accessdate=2009-04-19}}
</ref>
⚫ </ref> ] is one of the PR agencies used by Gazprom and the Kremlin.<ref>. Eurasia Daily Monitor Volume: 6 Issue: 148. August 3, 2009</ref> GPlus specializes in recruiting former EU officials and eminent journalists.<ref name="hones"> Euobserver 09.02.2009</ref>

In Italy, parliamentary investigations revealed that Prime Minister ]'s friend was a major beneficiary in a Eni-Gazprom deal which involved ].<ref name="hexagon">. Eurasia Daily Monitor Volume: 5 Issue: 228. December 1, 2008</ref>

In Serbia, investigations revealed a scandal at ], a Gazprom subsidiary.<ref>. Eurasia Daily Monitor Volume: 5 Issue: 212. November 5, 2008</ref><ref>. The Sofia Echo. Oct 22 2008</ref><ref> Kommersant Oct. 25, 2008</ref>

⚫ ] is one of the PR agencies used by Gazprom and the Kremlin.<ref>. Eurasia Daily Monitor Volume: 6 Issue: 148. August 3, 2009</ref> GPlus specializes in recruiting former EU officials and eminent journalists.<ref name="hones"> Euobserver 09.02.2009</ref>


A paper by Keith C. Smith asserts that:<ref name="divideanddominate"/> A paper by Keith C. Smith asserts that:<ref name="divideanddominate"/>


{{quote|There is serious political risk to Europe from its growing dependency on Russian energy resources. However, the greater danger is that this dependency is making a significant portion of Europe’s political and economic elite reliant on nontransparent financial payments that erode national sovereignty and distort national decisionmaking. }} {{quote|There is serious political risk to Europe from its growing dependency on Russian energy resources. However, the greater danger is that this dependency is making a significant portion of Europe’s political and economic elite reliant on nontransparent financial payments that erode national sovereignty and distort national decisionmaking. }}

==Case for prosecution==
{{See also|European Community competition law}}
Antitrust and anticompetitive behavior by European and foreign companies doing business inside the European Union is prohibited by ]. In the past, the European Commission has fined monopolies such as Microsoft.<ref name="divideanddominate"/> Neither Transneft or Gazprom has yet faced anti-trust charges.<ref name="divideanddominate"/>

Marvin Baker Schaffer says that the European Union could prosecute ] and ] under Article 82.<ref> Marvin Baker Schaffer 2008</ref> Keith C. Smith states that the price tag of Microsoft's behavior is a just small fraction of "the cost paid by Germans, Czechs, Hungarians, Italians, Greeks, and Austrians for Russian oil and gas as a direct result of the state-dictated export monopolies of Transneft and Gazprom".<ref name="divideanddominate"/>

A panel in a seminar organized by ] and ] said that "These anti-trust and anti-competition practices are a clear violation of Article 82 of the EC Treaty and of Article 45 of the Energy Charter Treaty" and asked how many Western leaders can really "negotiate well with the seasoned KGB-ers who make energy policy"?<ref></ref>


==References== ==References==
{{Reflist}} {{Reflist}}

==Further reading==
* Bugajski, Janusz Cold Peace: Russia's New Imperialism, November 2004, ISBN 0-275-98362-5
* Petrostate: Putin, power, and the new Russia. Marshall I. Goldman. Oxford University Press US, 2008 ISBN 0195340736
* The New Cold War: Putin's Russia and the Threat to the West. Edward Lucas. Palgrave Macmillan; Second Edition, Revised and Updated edition (March 17, 2009) ISBN 0230614345


==See also== ==See also==
Line 67: Line 96:


==External links== ==External links==
*{{cite web | url=http://www.ifri.org/files/Russie/ifri_Gazprom_paillard_anglais_mars2007.pdf | title=Gazprom, the Fastest Way to Energy Suicide | author=Christophe-Alexandre Paillard | publisher=Russia/NIS Center | date=March 2007}}
* Robert L. Larsson March 2007 * Robert L. Larsson March 2007
* . Jakob Hedenskog, Robert L. Larsson. June 2007 * . Jakob Hedenskog, Robert L. Larsson. June 2007
* {{cite web | url=http://www.twq.com/07autumn/docs/07autumn_baran.pdf | title=EU Energy Security: Time to End Russian Leverage | author=Zeyno Baran | publisher=The Washington Quaterly | date=Autumn 2007 }}
* {{cite web | url=https://www.policyarchive.org/bitstream/handle/10207/13043/bg_2083.pdf?sequence=1 | title=Europe’s Strategic Dependence on Russian Energy | author=Ariel Cohen | date=November 5, 2007}} * {{cite web | url=https://www.policyarchive.org/bitstream/handle/10207/13043/bg_2083.pdf?sequence=1 | title=Europe’s Strategic Dependence on Russian Energy | author=Ariel Cohen | date=November 5, 2007}}
* Marcel H. Van Herpen September 2008 * Marcel H. Van Herpen September 2008
* {{cite book | url=http://csis.org/files/media/csis/pubs/081024_smith_russiaeuroenergy_web.pdf | title=Russia and European Energy Security - Divide and Dominate] | author=Keith C. Smith | date=October 2008}} * {{cite book | url=http://csis.org/files/media/csis/pubs/081024_smith_russiaeuroenergy_web.pdf | title=Russia and European Energy Security - Divide and Dominate] | author=Keith C. Smith | date=October 2008}}
*{{cite web | url=http://www.fni.no/doc&pdf/FNI-R1508.pdf | title=Nord Stream: Not Just a Pipeline | author=Bendik Solum Whist | date=November 2008}} *{{cite web | url=http://www.fni.no/doc&pdf/FNI-R1508.pdf | title=Nord Stream: Not Just a Pipeline | author=Bendik Solum Whist | date=November 2008}}
*


] ]

Revision as of 23:56, 12 October 2009

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European dependence on Russian energy is heavy and growing. The European Union imports nearly half of its natural gas and 30 percent of its oil from Russia. Russia is consolidating its grip on oil and gas in Europe.

Major gas recipients

Russian natural gas as a % of domestic consumption.

Major recipients of Russian natural gas in 2005 (percentage of total domestic consumption):

  1.  Slovakia 108%
  2.  Finland 105%
  3.  Greece 96%
  4.  Bulgaria 89%
  5.  Czech Republic 84%
  6.  Austria 70%
  7.  Turkey 65%
  8.  Hungary 62%
  9. Former Yugoslavia 57%
  10.  Poland 47%
  11.  Germany 43%
  12.  Italy 30%
  13.  France 26%
  14.  Romania 23%
  15.   Switzerland 12%

Russian companies

Main articles: Gazprom, List of Gazprom's subsidiaries, and Transneft

Gazprom is the Russian state-owned energy company that exports gas to Europe. It also controls a large number of subsidiaries, including key infrastructure assets. Transneft is another important company in Russia's energy dominance.

The purpose of some companies is unclear. An U.S. Senate testimony noted that "Gazprom, with the silent support of the Kremlin has set up 50 or so middlemen companies, silently linked to Gazprom and scattered throughout Europe - such as the Centrex group of companies and the Gazprom Germania network - which do not add any value to the price of Russian gas being sold on European markets; yet they earn enormous sums of money which appears to simply vanish through shell companies in Cyprus and in Lichtenstein."

A paper noted that Russian firms have demanded foreign joint venture partners to agree to funnel profits through offshore accounts and well-known havens for "confidential funds" or to intermediary firms that bring no added value to the venture. Money laundering is used in "backdoor financing" for companies that want to conceal their Russian links and for key individuals in the West who hide the origin of their "consulting fees".

Russia's tactics

According to Ariel Cohen's paper "Europe's Strategic Dependence on Russian Energy" (2007):

  • Locking in Demand - Moscow is attempting to use long-term contracts with European countries to lock in demand. By dealing separately with countries rather than as a group, Moscow can discriminate countries on prices.
  • Locking in Supply - Moscow attempts to consolidate its control of strategic energy infrastructure throughout Europe and Eurasia, including supply, sale, and distribution of natural gas as well as as pipelines, refineries, electric grids, and ports.
  • Derailing Competition - For example, Moscow has pushed South Stream which competes against the EU's Nabucco pipeline as well as the proposed extension of the EU-backed South Caucasus Pipeline.
  • External Consolidation - Moscow is consolidating control of supply outside Russia, particularly by signing long-term exploration and supply agreements with Turkmenistan, Uzbekistan, and Kazakhstan.
  • Internal Consolidation - Moscow is consolidating Russia's oil and gas sector in the hands of state-controlled entities. Major international entities are pushed out of Russia.
  • A Gas OPEC - Russia is "stealthily and steadily" developing a "gas OPEC" cartel to control the output and price of gas. The cartel would include major producers, including Argentina, Bolivia, Venezuela, Iran, and Qatar.

Moscow signed the Energy Charter Treaty in 1997, but it has refused to implement it.

Creating and cultivating interests groups

The Kremlin has systematically created or cultivated "friendly" interest groups in both Central and Western Europe who "benefit financially from their formal and informal ties to Russian state energy companies".

In Germany, the Social Democratic Party of Germany believes in a Russia-friendly policy which it calls "Ostpolitik", "cooperative energy security policy", and "strategic partnership". The leadership of SDP has widely documented ties with Kremlin and Gazprom, including posts at company boards or party donations. Gerhard Schröder's case is well-known by the public.

In Sweden, the Swedish prosecutor's office began to investigate a bribery case in early 2009. Swedish TV 4 also revealed that Gazprom's subsidiary Nord Stream AG has hired several former Swedish officials.

In Italy, parliamentary investigations revealed that Prime Minister Silvio Berlusconi's friend was a major beneficiary in a Eni-Gazprom deal which involved Central Energy Italian Gas Holding.

In Serbia, investigations revealed a scandal at YugoRosGaz, a Gazprom subsidiary.

GPlus Europe is one of the PR agencies used by Gazprom and the Kremlin. GPlus specializes in recruiting former EU officials and eminent journalists.

A paper by Keith C. Smith asserts that:

There is serious political risk to Europe from its growing dependency on Russian energy resources. However, the greater danger is that this dependency is making a significant portion of Europe’s political and economic elite reliant on nontransparent financial payments that erode national sovereignty and distort national decisionmaking.

Case for prosecution

See also: European Community competition law

Antitrust and anticompetitive behavior by European and foreign companies doing business inside the European Union is prohibited by Article 82 of the Treaty Establishing the European Community. In the past, the European Commission has fined monopolies such as Microsoft. Neither Transneft or Gazprom has yet faced anti-trust charges.

Marvin Baker Schaffer says that the European Union could prosecute Gazprom and Eni under Article 82. Keith C. Smith states that the price tag of Microsoft's behavior is a just small fraction of "the cost paid by Germans, Czechs, Hungarians, Italians, Greeks, and Austrians for Russian oil and gas as a direct result of the state-dictated export monopolies of Transneft and Gazprom".

A panel in a seminar organized by Chatham House and Transparency International said that "These anti-trust and anti-competition practices are a clear violation of Article 82 of the EC Treaty and of Article 45 of the Energy Charter Treaty" and asked how many Western leaders can really "negotiate well with the seasoned KGB-ers who make energy policy"?

References

  1. ^ Ariel Cohen (November 5, 2007). "Europe's Strategic Dependence on Russian Energy" (PDF).
  2. U.S. Senate Hearing on Russian Energy: Roman Kupchinsky, June 12, 2008
  3. ^ Keith C. Smith (October 2008). Russia and European Energy Security - Divide and Dominate] (PDF).
  4. Die SPD lässt sich von Russland erpressen Stern 20. November 2007
  5. "Nord Stream gift prompts bribery probe". The Local. 2009-02-19. Retrieved 2009-04-19.
  6. Tommie Ullman (2009-02-16). "Former political employees now on other side in the hot 'pipe line question'". The Local. Retrieved 2009-04-19.
  7. Berlusconi, Centrex, Hexagon 1 and 2 and Gazprom. Eurasia Daily Monitor Volume: 5 Issue: 228. December 1, 2008
  8. YugoRosGas—Another Gazprom Scandal. Eurasia Daily Monitor Volume: 5 Issue: 212. November 5, 2008
  9. Serbia rocked by gas price scandal. The Sofia Echo. Oct 22 2008
  10. Business Secret Kommersant Oct. 25, 2008
  11. Russia's Hired Lobbies in the West. Eurasia Daily Monitor Volume: 6 Issue: 148. August 3, 2009
  12. Russia hones new image among EU elite Euobserver 09.02.2009
  13. The great gas pipeline game: monopolistic expansion of Russia's Gazprom into European markets Marvin Baker Schaffer 2008
  14. Transparency in Russia and Eurasia and Energy Security in Europe

Further reading

  • Bugajski, Janusz Cold Peace: Russia's New Imperialism, November 2004, ISBN 0-275-98362-5
  • Petrostate: Putin, power, and the new Russia. Marshall I. Goldman. Oxford University Press US, 2008 ISBN 0195340736
  • The New Cold War: Putin's Russia and the Threat to the West. Edward Lucas. Palgrave Macmillan; Second Edition, Revised and Updated edition (March 17, 2009) ISBN 0230614345

See also

External links

Categories: