Russia Exports Legal Nihilism to Italy

Or: How Gazprom’s call option on Eni’s stake in Gazprom Neft proves Yukos asset laundering – and I can’t believe I am the only one paying attention to it Just for rhetorical purposes, let’s imagine way back to that time before Europe was subservient to the Russian energy oligopoly. Back before the national champions of Germany, France, and Italy would accept just any deal engineered from the Kremlin, no matter how pernicious to the energy security of other EU member states and no matter how opaque or corrupt the implications, back when there was still genuine competition, thriving independence, and corporate social responsibility. It was only April, 2006.

The scene: an emergency summit held at the European Parliament to discuss Russia’s quickly advancing energy ties to North Africa, viewed with great alarm by Europe. In particular, Italy is leading the charge in bringing this case of energy co-optation to the world’s attention, as the previous summer Gazprom signed a memorandum of understanding with Algeria’s Sonatrach – suddenly putting control of 69% of the country’s natural gas supply under the control of the Kremlin.One corporate crusader from the private sector took to the stage to heroically point out what Russia is trying to do. It was none other than Paolo Scaroni, the CEO of Eni, who boomed into the microphone a prediction of catastrophe: “We are increasingly dependent on a small number of suppliers (…) an alliance of the top three or four gas exporters would be more effective than OPEC.“What prescience displayed by the Italian wildcat! This was even before Gazprom sewed up all competing supply routes from Central Asia, before the Nigeria deals, and before the Latin American adventures.Alas, the Italian Resistenza to Gazprom monopoly was very short-lived, and by the fall Scaroni had signed the largest deal in the history of Russian energy, turning Eni into Gazprom’s biggest customer and booster. After Scaroni folded to Russia, so did Italy’s government – they even offered a job to Il Professore.As such, Eni bought into a lot more than just natural gas supply – it has since become a lobbyist, political representative, and even an asset launderer to whitewash the corruption of the Russian state – something demonstrated by this week’s news of the Gazprom Neft call option. The guy can’t even say a word about the invasion of Georgia – so I don’t think he would ever be helpful the next time the gas gets cut off to a EU member.Scaroni and Eni (and Enel for that matter) did what journalist and author Steve LeVine describes “jumping into bed” into with a hostile state well known for its expropriation tendencies. They figured it their best shot at survival was to put themselves at the service of the Russian state. The cost has been their complicity in illegal activities.Although most well known these days for helping the attempt to defeat the Nabucco pipeline with the South Stream project, or even for their attempt to corner Libya’s natural gas, Gazprom’s partnership with Eni served its most important function by getting a well known Western corporation – one that was even listed on corporate social responsibility indices – to legitimize their illegal seizures of Yukos assets during the persecution of Mikhail Khodorkovsky by participating in the auction.Although BP was the first foreign company to attend a Yukos auction (a lot of good that did them), Eni and Enel became the first foreign companies to own these contentious properties, which were seized in violation of Russian law (which dictates that non-core assets should be first to go). The companies were well warned beforehand, as the Italian press leaped all over the story.Scaroni’s response? He fully denied that he was pressured into making this purchase of stolen property, and insisted that the company would hold onto its stake in Gazprom Neft. On June 19, 2007, he told the Wall Street Journal that “When we made the deal, if you’d met me I would have told you that the chances of us holding the 20% were small. Now, today I think that those chances are growing considerably.” Gotcha.I have insisted for years that Eni was complicit in the carve up of Yukos, which I believe has had an especially damaging impact on the case of my client, the political prisoner Mikhail Khodorkovsky, and a damaging impact on human rights in Russia in general. Today I have my proof, which shows that Eni was used by Gazprom as nothing more than intermediary holding company to clean up the title of the stolen property and help legitimize the state’s entire politically motivated campaign both against an individual and a publicly traded company.The siloviki behind these transactions have successfully exported legal nihilism via pipeline to Italy, and induced corrupt behavior out of a formerly prestigious company.