Gazprom way towards Europe

„The Russian gas is scarier than the Russian tanks”- the sentence is attributed to the president of the E.ON Ruhrgas Group, Burhard Bergmann.  After 36 years of work in the German concern, he will retire in a month.  

How did the Russians got to export gases in Europe? Everything started in 1996, a Soiuznefteeksport employee remembers. „We have huge gas reserves, just well for sewerage, but not of pipes. Somebody thought of buying pipes overboard and to pay with natural gases”, Aleksandr Lantov related. A soviet mission went in Italy for negotiating with ENI. „We came back with anything: the Occident was afraid of Russia”.  The first gaspipeline of export was built in Czechoslovakia, in 1967. Then the Germans started to be interested in the Russian gas.  Despite the American opposition URSS and Ruhrgas concluded the historical agreement „gases against pipes” that opened the Russian gas way to Europe, in February 1970. A profitable business: both Ruhrgas, which assumed the marketing part, as Deutsche Bank, which financed the purchasing of pipes and Mannesman, which received a big pipes order, won good money especially thanks to the low price for Russian gas. So the collaboration scheme started: „infrastructure and money instead of natural gases” and which further allowed the turn up of Orenburg gaspipeline –Western border, Urenga-Pomara and Iamburg- Western border.

A match-less success

In 1991, Gazprom thought to take part to the privatization of the East-European gas distributor, Verbundnetz Gas (VNG). At that time, the Russian company assured almost the whole gas necessary of East Germany and was convinced of the auction result.  But the Russian offer was rejected: Ruhrgas received the laurels. Later, Gazprom managed to buy 5% of the VNG stocks. „It was the tactic error of Ruhrgas and which lead to the turn up of a big competitor on the natural gas of the German market”, Director of Vostok Nafta, Serghei Glazer thinks. Finding understanding to another German concern- BASF, Gazprom set up with its subsidiary, Wintershall a holding for the gas delivery to the German consumers.  At Wingas, Gazprom received  a share of 35% and an option for another 15%.”It was an alliance of convicts”, the former responsible of BASF comment. „The combine works facility didn’t manage to obtain from Rurhgas a reduction for the gas price. Nobody thought that of our alliance something would come up. When we started to set up the pipes, the skeptics made fun of us, saying that nobody didn’t dig up so much iron in ground for nothing”.  Today, Wingas holds 2000 km of gaspipelines and one of the biggest underground deposits– Reden. „It was the greatest ever registered success of Gazprom in Europe in the entire history of natural gas exports”, Vladimir Milov, director of Institute for energetic studies estimates.  

Where is the money?

In 2001, President Vladimir Putin started the reorganization of Gazprom: Rem Viahirev was substituted with Aleksei Miller. „Be careful not to steal anything”, Putin told to his protégé, showing to be puzzled of the difference between the used price by Gazprom in its retail transactions with the contraherent companies from the Occident and the ones of selling again to purchasers. „Why do we sell so low. Where is the difference? Where is the money?” Putin asked. For the contractual companies not only big companies of natural gas figured but also a series of new intermediaries, which assured about a quarter of the export flux. Other traders were set up with the participation of Gazprom. So, Progress Gas Trading (PGT) was found up by Gazprom with the Yugoslav company Progress. And Prometheus Gas – equally with Kapeluzos brothers, from Greek. The biggest owner of the company Gas Trading was the company of the Poland enterprising, Aleksander Gudzowata and which frequently played on Gazprom side.

So, in 2001, when Warsaw agreed with the Norwegians from   Statoil the build up of a gaspipelines from Norway in order to reduce the dependence of the Russian gas, Gudzowata opposed to the project. He sustained an alternative variant of gaspipelines which would have allowed importing Russian gases, but from Germany.

Preferential prices

The Bulgarian and Poland companies Gaz Trading and Bartimpex, as the Yugoslav company PGT received gases at preferential prices, the money being flowed in with a delay of half a year. Of course, amends weren’t applied, although the value of delayed payments frequently reached to three billions dollars.

At the further checks requested by the new owner of Gazprom, Aleksei Miller, the economists estimated the loss profits in four years to 144 millions dollars. In some trade companies, the Gazprom package was divided between the entrepreneurs who liked the Russian company. So, the participation share of the Russians at the Hungarian Group Panrusgaz was reduced to 31%, 9% reverting to the businessman Mihail Rahimkulov (in 1999, Panrusgaz administrated a volume of 7,5 billions cubic meters of gas).  At Gas Trading, the Gazprom share decreased from 36% to 15,88%. 

Everything has limits

But the Gazprom possibilities of increasing its deliveries towards the final consumer are limited by the transport capacities. The Gazpromeksport managers consider that until the put in service of North Stream, in 2011, the Gazprom chances of finding new European clients for the Russian gas was exhausted. Free of long term contracts there are about 20-25 billion cubic meters of gas. Of which 10 billion are already sold by the European traders of  Gazprom, inclusively  by Wingas. Another about 10 billion are commercialized by the Switzerland company RosUkrEnergo, where Gazprom holds 50%. According to RUE, in 2006 it delivered to Europe 8,95 billion cubic meters of gas. All these volumes, could have been supplied directly by  Gazprom, obtaining not a half, but the whole of the carried on profit achieved by RUE, for example.Namely, 785,4 million dollars in 2006. Nobody thought but that in a near future, the European partners of Gazprom will agree with such a scenario. 

The track of money

In a recent interview granted to Vedomosti newspaper, Iuri Komarov, responsible in 2001, with exports of natural gases, said that a part of the realized amounts by the sale of this fuel sale is not in the intermediary companies, but in „the budgets of the governments from Germany, Italy and France”, where „the total amount of the  taxes is comparable with the value of the commercialized gas by the exporters at the boarder”. In conclusion, it proposed as strategically aim of its activity, the way out to the final beneficiary. Until now, the undertaken schemes failed– the gas keeps on being sold to the frontier and, the Gazprom representatives emphases, at a considerable lower price against the established tariffs for the consumers. 

Centrex and Conef

According the Vedomosti publication, the Romanian company Conef purchased in 2006 from Gazprom about 1,2 billion cubic meters of gas. The Russian concern collaborates with the Romanian company since 2002. In 2007, Conef and Gazprom signed a contract until 2030. Through the Austrian Company Centrex, Gazprom transported in May 11, 2006, an amount of 44 million cubic meters of gas. Centrex was set up in 2003, one of the founders being Gazprombank, which gave up in 2005, to the Switzerland subsidiary of  Vnestorgbank – Russische Kommerzial Bank.

Increased gains

The experts are convinced that Gazprom can win more by export. Working with industrial enterprises from Great Britain, Austria and Germany can be obtained about 100 dollars additional profit to every 1000 cubic meters of gas included transport and storage costs.  There are aimed markets by Gazprom, where its traders – Gazprom Markerting&Trading (GMT), ZMB, Wingas are in force. GMT activate, count 140 employees, but the future plans are really imposing: the company proposed itself to increase the Russian company presence in Great Britain, from 1,5% in present, to 14% in the next three years. And in France the trader intends to increase the actual sales from 0,5 billion cubic metres to 2,5 billion till 2011.

Contracts

About 70% of  the European exports of Gazprom are comprised in long terms contracts concluded with big intermediary local companies: Eni, E.On, Wintershall, RWE, Gaz de France, etc. During January =- November 2006, Gazprom supplied to those companies about 100 million cubic meters of gas by the amount of 135 billion, which figures in the database of the Federal Service of Customs. The rest is controlled by intermediaries of lower caliber and which disappeared in time. So, there aren’t anymore no PGT, no Bartimex. Instead, others turned up– Centrex si Conef.