Last Friday in my FT column I wrote about Eni CEO Paolo Scaroni’s backing of the South Stream pipeline project with Gazprom as being detrimental to European energy security, as it decreased diversity of suppliers and competition by damaging the Nabucco project. Now, in the same pages of that publication, Mr. Scaroni is quoted as warning that Europe has been “sleepwalking” into a “staggering” dependence on natural gas. Listening to the Eni chief talk about energy dependency is like getting parenting advice from Britney Spears – you’d be crazy to take it seriously.
For one, this is the corporation that single-handedly delivered control of the Italian energy market to the Kremlin following Gazprom’s MoU with Algeria – a move which I said made Eni the first victim of the Gas Opec. Shortly thereafter, Scaroni signed the largest supply deal on earth with Russia, and gave Gazprom direct access to Italian consumers. Prime Minister Romano Prodi has also eagerly joined the parade to make Italy Russia’s favorite toy in the EU, competing with the likes of enchanting Germans of the SPD. During all this backslapping and multi-billion euro deal signing, who is representing the interests of Italian consumers?Eni was also one of the very first foreign owners of Yukos assets sold in illegal auctions. This made many people, including myself, very upset that energy companies were being pressured by the Kremlin into doing things to help legitimize Russia’s human rights abuses and illegal seizures of property. At the time, Eni said they weren’t acting on behalf of a state company, but then, low and behold, the news broke that Gazprom was exercising its call option quite early to take back control of the Yukos assets at a discount, leaving Eni with an outstanding bill. How’s that for shareholder value? I hope that someone over at the board of directors at Eni is reading the recent Dutch court decision (available in full here) which ruled that the Russian bankruptcy receiver Rebgun (who was subsequently nominated to the board of Rosneft, the chief beneficiary of the Yukos auctions), sold those assets illegally.Now we have seen that Mr. Scaroni has followed in the footsteps of his colleague over at Enel, Fulvio Conte, and has become a lobbyist for Russia’s interests in Europe. During his speech to the World Energy Congress in Rome he said “Algeria and, in particular, Russia will continue to be the pillars of our energy security for years to come.” A recent report predicted this precise behavior of third-party business advocates as part of the Kremlin’s strategy to leverage power in Europe.Soon we can expect executives from companies like E.On, Eni, Enel, BP and others begin to fill the public space with plentiful banter about Europe’s “best interests” and “energy security” and how it is perfectly OK to allow monopolies to control both supply and distribution of energy despite a complete lack of transparency and the corporate governance of an authoritarian state. It will become their chief objective to carry out the orders of Moscow and defeat Neelie Kroes’s unbundling proposal, and convince the parliamentarians in their pockets that rule of law is less important than next quarter’s results.My only advice: don’t listen to them. There’s no reason why Europe can’t have positive, constructive and fair relations with Russia AND have competition in energy, rule of law as demonstrated by the ratification of outstanding treaties, and transparent mutual investment in infrastructure. This divide and rule tactic actually hurts the interests of both sides.