Isn’t it great when you can get a third party to endorse your interests for you? That’s exactly what Russia’s Gazprom has been perfecting in recent years by creating tight relationships with key national champions such as BP, Total, E.ON, ENI and Enel. Now it’s starting to pay off.
Fulvio Conti, CEO of Enel
Remember Fulvio Conti? The successful CEO of Italian energy company Enel? Enel has worked very hard to get into the good graces of Putin’s Kremlin, including participation in the infamously contested Yukos auctions. Despite ample warning, Enel, along with ENI, became one of the first foreign owners of stolen Yukos assets – buying a 20% stake in Gazprom Neft formerly owned by Mikhail Khodorkovsky’s destroyed company. Although they denied that they were acting as a proxy for the Russians to launder the assets, Gazprom has already exercised its call option (much earlier than expected) to take back these properties at a knockdown price, according to reports. Fulvio Conti and Enel were handsomely rewarded for this assistance. It was recently announced that the company would raise its stake in OGK-5 to 37%, becoming the first foreign owner of an electricity generator in Russia. Perhaps as a way of saying thank you, Mr. Conti took time in his interview with the FT to push for Russia’s right to control both supply and distribution assets in Europe – which goes up against Neelie Kroes’s unbundling proposal:
“The Russians are asking for reciprocity,” Mr Conti said in an interview in his Rome headquarters. “They want a piece of the European downstream market, saying ‘we own and transport the gas, why can’t we be part of the action?’ ” Enel, which has grown into Europe’s third largest utility by market capitalisation through diversification of markets and energy sources, has been a beneficiary of the calls for reciprocity. Italy last year signed off on a deal to give Gazprom access to Italy’s end users. In return analysts say Italy’s Eni and Enel landed stakes in Gazpromneft, Gazprom’s oil arm, and in two gas fields in the bankruptcy auction of Yukos assets.
Should we really be so surprised? This is the same person who obeyed Kremlin orders to cancel his own speaking engagement at the Russia Economic Forum in London, because Moscow preferred to shift the venue of such business conferences back to Russia. Certainly there are some in the energy business motivated to defend Russia’s energy agenda in Europe out of fear and intimidation. As Jonathan Stern, head of gas research at the Oxford Institute for Energy Studies, warns, “If the EU requires Gazprom to sell assets in Europe because of reciprocity, I have a real concern for European asset holders in Russia.”