European Union Energy Companies Court Moscow

Article excerpt

Burckhard Bergmann, chairman of the board at German energy supplier E.ON Ruhrgas, holds another title not likely to appear on his business card: Russia's honorary consul in the state of North Rhine-Westphalia.

Mr. Bergmann took the post late last year, raising some concern about conflicts of interest between Germany's largest energy company and one of the world's largest energy exporters.

"President Putin told me, 'You are my new employee in Germany now,' " joked Bergmann - the only foreigner with a seat on the board of Gazprom, Russia's energy giant - during a recent interview in Der Spiegel, a prominent German news magazine. "But he was laughing when he was saying that."

Brussels isn't laughing. As European Union (EU) leaders - meeting Thursday for a two-day summit - struggle to establish a unified energy security policy that will lessen the bloc's dependence on Russia, the close ties between many European energy companies and Moscow pose a signficant challenge.

In a bid to secure a foothold in Russia's vast natural-gas reserves, E.ON, Gas de France, and Eni of Italy have in the past year signed new, long-term contracts with Kremlin-backed Gazprom that allow it direct access to their markets and consumers. The result is that Gazprom's grip on European markets is growingstronger, controlling not only the exploration and delivery of natural gas, but, increasingly, the sale of it as well.

"This is a problem for Europe," says Katinka Barysch, chief economist at the Center for European Reform in London. "What we're trying to do in Europe is create an integrated, open, and liberal gas market. You can't do that if you have one company controlling the entire gas supply chain."

A call for more deals with Gazprom

Last month, officials from E.ON, Gas de France, Eni of Italy and others joined Gazprom at the Russian House of Science and Culture here for an energy conference - less than a week after an EU-Russia summit collapsed in part over differences on energy policy. At the conference, executives called for a thaw in EU-Russian relations and said more dealings, not fewer, with Gazprom are the key to energy security.

The relationship between Gazprom and different European energy companies often goes deeper than simple supply contracts (see box).

In a prearranged deal, Eni bid this spring on behalf of Gazprom when valuable assets of the now-defunct Russian energy company Yukos went on auction. After selling Yukos assets to Gazprom, Eni was granted access to Gazprom's gas fields.

Gazprom produces 90 percent of Russia's natural gas and owns most of its pipelines. Europe gets 25 to 40 percent of its natural gas from Russia, a figure that could double two decades from now, according to Fariborz Ghadar, director of the Center for Global Business Studies at Penn State University. …