On Orders from Moscow

Imagine my dismay when I picked up the International Herald Tribune today, only to read the following headline on front cover:

Europe’s Energy Giants Call for Business as Usual with Russia

Yes, it seems that with particularly bad timing, Eni of Italy, Gaz de France and E.ON Ruhrgas of Germany have jointly called for business-as-usual with Russia, despite growing tensions between Moscow and Brussels over a broad range of issues.


Once firms become beholden to Gazprom and the Kremlin in long-term deals, it seems they must fulfill an unspoken contractual condition to evangelize against the national interest of their own countries.

At a moment in which the European Union is struggling to achieve solidarity and commit to a common energy policy, enticing the Russians to ratify the Energy Charter and creating a fair and equitable rule-based system to de-politicize the energy trade, here come three opportunistic firms seeking to undermine energy security and pursue their own bilateral deals with Gazprom. There are some particularly choice quotes in the article that range from ironic to outrageous:

“It is about long term contracts, infrastructure joint ventures and asset swaps,” said Uwe Fip, senior vice president of E.ON Rurhgas. Edouard Sauvage, vice president of the supply division of Gaz de France, said the strategy toward Russia was to have reliable and secure contracts for energy delivery. “Russia is our neighbor,” said Jean-Marie Devos, secretary general of Eurogas, the agency that represents the industry. “We should take energy on its own merits and not let the political climate affect it.” … “The business community knows that gas is not a weapon in order to threaten Europe, which the media say,” he said. (Vladimir Kotenev, Russia’s ambassador to Germany)

In light of this call for business as usual, shareholders need to ask their board of directors at Eni, Gaz de France, and E.ON Ruhrgas a number of urgent questions. First, has Russia exhibited a pattern of using energy to apply political pressure, and does increasing Europe’s reliance of Russian energy increase its vulnerability to the influence of an autocratic state? The evidence overwhelmingly points to yes. Second, what impact does Europe’s uncritical patronage of a Russian state-held energy giant have on human rights and democracy? Here there is also abundant evidence – and not just the destruction of rule of law in the trial of Mikhail Khodorkovsky. Consider how Gazprom’s revenues have been used to eat up independent media, creating a recklessly nationalistic cult of personality for the president on Russian TV, 24 hours a day, and making independent journalists, such as the late Anna Politkovskaya, increasingly isolated and exposed to threats. If Eni, Gaz de France, and E.ON Ruhrgas are not the corporate underwriters of repression in Russia, please tell me the last time they have uttered a single word about human rights, democracy, or corporate social responsibility in Russia? And lastly, shareholders need to be more skeptical of Eni, Gaz de France, and E.ON Ruhrgas’s near total lack of regard for competition and for reciprocity of energy investments. Russian state owned companies have surged ahead in Europe, buying up companies and properties in all phases of energy production, distribution, and commercialization, yet European companies wanting to invest in energy in Russia are by law relegated to minority positions, and are frequently harassed in politically motivated campaigns to expropriate major stakes in their projects. Gazprom’s monopoly of the pipeline infrastructure and leadership in forming the exploratory committee for the new Gas OPEC also further contribute to long established pattern that steadily diminishes the environment for competition. This call for “business as usual” is the clearest indication yet of the near-total co-optation of major European energy companies by the Kremlin. These companies have made themselves lobbyists against the rule of law in a country that has dangerously retreated from reform and market-oriented policies towards a belligerent autocracy. The EU is increasingly concerned that Russia’s market transition and reliability as an energy supplier are far from guaranteed. People are now finally beginning to make the connection between the Kremlin’s consolidation of control over natural resources and its brutal suppression of political opposition and competitive markets. The strength of the burgeoning state-controlled energy conglomerates has been built through numerous incarcerations and thefts on a grand scale, all officially sanctioned by the state. The most recent dirty business – involving everything from cyber-war to the refusal to extradite a murder suspect – only makes the timing of this “plea” by Europe’s gas giants all that much more nauseating. It shows an incredibly insensitivity that these companies couldn’t even wait one week – until the Lugovoi extradition story blows over – completely discredits these companies and makes them look like the handmaidens of the Kremlin. Who will lament the crocodile tears shed by these predatory oligopolists, who have not only underwritten a corrupt regime, but also undermined the security of European consumers? E.ON Ruhrgas willingly promotes the ecologically dangerous and economically senseless pet project of the Kremlin – the Nord Stream pipeline – that will serve Russian foreign policy by cutting Poland out of the transit process? Meanwhile Eni opportunistically acts as a proxy for Gazprom through participation in rigged state auctions of stolen goods. Do these companies really believe they can somehow escape the fates of Shell at Sakhalin, BP at Kovykta, or even Yukos, if their interests come up against the private agendas of the siloviki?