Russia in the European energy sector

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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

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

Slovakia 108%
Finland 105%
Greece 96%
Bulgaria 89%
Czech Republic 84%
Austria 70%
Turkey 65%
Hungary 62%
Former Yugoslavia 57%
Poland 47%
Germany 43%
Italy 30%
France 26%
Romania 23%
Switzerland 12%

Gazprom

Main articles: Gazprom and List of Gazprom's subsidiaries

Gazprom is the Russian state-owned energy company that exports gas to Europe.

It controls a large number of subsidiaries, 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 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

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".

For instance, 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 police is investigating a bribery case related to Nord Stream. Gazprom's subsidiary Nord Stream AG has hired several former high-ranked officials in Sweden. 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.