Yuriy Poyta, Dmitriy Zolotukhin
French and German companies, which lobby the lifting of sanctions against Russia in the EU countries
Despite the efforts of the powerful pro-Russian lobby in the political and business structures of Europe, on July 1, 2016, the EU extended the economic sanctions against Russia. Restrictive measures cover the financial, energy and defense sectors as well as dual-use goods.
In 2015, oil and gas incomings accounted for more than 51% of total revenues to the Russian budget and brought over 7,7 trillion rubles into the treasury.60% of Russian exports are energy sources (oil, oil products, natural gas). The critical dependence on the sale of raw materials to foreign markets caused the major setback of the US and the EU sanctions on Russian energy production. However, the same relationship (only inverse) can also be observed in those European countries, which have for decades established economic relations with the Russian Federation to meet their energy needs.
Considering the leading European economies – Germany and France (taking into account Brexit, we put the United Kingdom aside), one will mark their evident interest in the uninterrupted supply of Russian oil and gas.
In 2013, Russia was the third-largest supplier of gas (17,9%), oil (12,9%), and coal (17,2%) to France. As far back as in 2014, due to the political situation, the import of oil and mineral fuels from Russia to France sank by 3% to 8,77 billion euros.
Such seemingly insignificant import reduction aggravated the development of joint French-Russian mega-projects on the territory of Russia, but cooperation had by no means stopped.
Russian-German cooperation in the energy sector is now represented by theNord Stream pipeline with flow efficiency of 27,5 billion cubic meters per year, passing under the Baltic Sea to supply gas to Europe bypassing Ukraine. With its help, Germany further strengthens its positions in the EU. And the second pipeline Nord Stream 2, which increases flow efficiency on this route to 55 billion cubic meters of gas per year, further enhances Russian-German relations. To implement the second project, Nord Stream-2 AG company was created; its shareholders are Gazprom (50%) and European companies OMV, BASF, Engie, Shell, and Uniper (10% each).
According to European Commissioner for Climate Action and Energy Miguel Arias Cañete, upon the completion of the Nord Stream 2, 80% of gas exports from Russia will account for Germany, which makes the country a European monopolist in the transit of Russian resources, while Bundestag gets increasingly hooked on the Kremlin’s gas.
In 2013, energy accounted for 86,7% of German import from Russia, and natural gas import amounted to 38% (36% in 2014) of the total volume of its consumption; oil import amounted to 34% (30% in 2014).
As we can see, major French and German energy companies, which have for decades built bridges with Russian oil and gas miners, lose serious money.
The largest producer of natural gas in Russia is JSC NOVATEK associated with Putin’s close friend Gennadiy Timchenko. NOVATEK has deposits in the world’s largest gas-bearing region.
On July 16, 2014, the Office of Foreign Assets Control (OFAC) of the US Department of the Treasury issued the Sectorial Sanctions Identifications List which included JSC NOVATEK and companies where its ownership was over 50% (including Yamal LNG). However, in the Russian company they say that sanctions did not affect the projects, assets or liabilities (including borrowings).
Representatives of NOVATEK can be trusted since the world’s largest oil and gas company Total (headquartered and owned in Paris) has not reduced cooperation with Russia after the imposition of sanctions and even increased its ownership interest in the equity capital of NOVATEK to almost 20%.
According to Michael Borrell, Senior Vice President Continental Europe and Central Asia at Total, as of January 2016, the amount of investment by the French giant in NOVATEK’s biggest project Yamal LNG reached $3,7 billion.
Patrick Pouyanné, Executive Vice President of Total, claims that “sanctions did not exert a significant impact on existing joint projects with Russian partners of the company”. In June 2016, at the St. Petersburg International Economic Forum,Pouyanné stated that Total managed to create financing schemes for Russian projects for nearly $20 billon in circumvention of sanctions, attracting European and Chinese banks and financial institutions. Let us ask ourselves: who is planning to exert international pressure on the one he invests so much money in?
In the press service of NOVATEK, as usual, “Iskanders are nickering enviously” informing that the industry has not only withstood but even is developing. For example, on June 21, 2016, at the shareholders’ meeting, the financing of JSC Yamal LNG was approved (construction of a liquefied natural gas (LNG) plant with the capacity of 16,5 million tons per year). The press service’s news release indicates that the volume of financing will exceed $19 billion.
NOVATEK’s 2015 financial report shows that revenues from sales of oil products increased by 32,9%, operating income – by 11%. The volume of liquids production rose by 51% in 2015. The year of 2016 also started successfully for the Russian-French company: revenues from sales of products increased by 22,5% (compared to the first quarter of 2015) and amounted to 139,4 billion rubles. According to experts, the revenue growth can be explained by the increased volume of sales of liquids.
Over the next 25 years, service maintenance of Yamal LNG plant and training of Russian specialists will be conducted by another big European company – Italian Nuovo Pignone. The agreement on strategic partnership was also reached at the St. Petersburg International Economic Forum. Furthermore, contracts in LNG projects were signed with Italian SAIPEM S.P.A. and GermanLinde AG.
German company Linde AG owns two oxygen plants and several enterprises in Russia; CEO of the company is Wolfgang Büchele, who besides his main duties is the Head of the Eastern Committee of German Economy.
Chairmanship of the Eastern Committee of German Economy gives Büchele ample opportunities for lobbying the interests of Russian Neftegaz as the abovementioned structure acts as the intermediary between the German state institutions and the Russian capital in matters of the presence of German companies in Russia.
Wolfgang Büchele is an active lobbyist of Russian (and, of course, of his own) business interests, who clamors for the lift of anti-Russian sanctions. At the end of October 2015, Wolfgang Büchele pushed through the creation of a German-Russian business platform which united, among others, the Eastern Committee of German Economy and the Russian Union of Industrialists and Entrepreneurs.
At the St. Petersburg forum, Wolfgang Büchele negatively assessed the role of Ukraine and called Ukraine “a deadlock in relations between Europe and Russia”. According to his version, it is expressed “in the absence of the desire to overcome the crisis inside the country and the failure to abide by the Minsk agreements”. Moreover, he is actively promoting the idea of realization of the North Stream 2 among the representatives of German business. Büchele urged to “modify” the EU strategy for the sanctions policy. However, he does not expect the complete removal of restrictions, calling such hopes too “ambitious”. As a first step, Büchele believes that the EU decision could exclude some senior Russian officials from the EU “no entry” list.
Among the shareholders of the Nord Stream 2 there is also the French company Engie (former GDF Suez), one of the largest energy companies in Europe. Already in June 2015, Engie signed with Russian Novatek Gas & Power (NOVATEK affiliated structure) a long-term (23-year) contract for the supply of 1 million tons of LNG annually under the Yamal LNG project. President of the company Gerard Mestrallet stated that the company is taking great pains to convince the EU leadership that the latter should strongly support the start of the construction of the Nord Stream 2. He underscored that Russia is definitely worth of investments.
Sometimes French energy officials speak not only individually but also in unison. For instance, Mestrallet, together with the heads of several large French companies (such as Total), made a public statement in which he noticed that “Europe should not impose any sanctions against Russia; on the contrary, it should develop cooperation with Russia. Many French companies share this view. Sanctions should be lifted”.
In October 2015, CEO of German chemical giant BASF (which owns 10% of shares in the Nord Stream-2 AG and actively invests in natural gas production in West Siberia) Kurt Bock announced his plans to invest around 2 billion euros in the construction of the Nord Stream 2. German manufacturer also noted that “Russia is and will remain the major and reliable supplier of oil, natural gas and other energy resources to Europe, and Europe is and will stay an important and stable market for Russia”.
Almost in unison with the German business, political circles are also gradually turning their course to the east. Vice-Chancellor of Germany Sigmar Gabriel stated that Germany was ready to support the construction of the Nord Stream 2 gas pipeline, and in July 2016 even spoke for Russia’s return to the G8. “Russia should not be put on its knees”, “European Russia should not be lost”, “a new ‘cold war’ should be prevented”, “let us build European security together with Russia” – these and similar statements from time to time can be heard from German Foreign Minister Frank-Walter Steinmeier and from Coordinator for Intersocietal Cooperation with Russia Gernot Erler.
In the meantime, one of the stumbling blocks to the Nord Stream 2 became the Polish antimonopoly regulator (official name – the Office of Competition and Consumer Protection, UOKiK), which virtually blocked the implementation of the project. Officials of the regulator claimed that the construction of the pipeline could lead to the restraint of competition on the gas market as well as to a significant strengthening of Gazprom’s control over the clients in the region.
UOKiK’s position was also supported by Pavel Nerada, expert of the Sobieski Institute (part of the Stockholm Network of liberal expert centers): “If the Nord Stream 2 is constructed, Gazprom will actually become a total monopolist and receive an unfair infrastructural advantage – the artificial barrier to any third party who would like to engage in gas supply to Poland will arise”.
Such events and statements of the representatives of large European capital reveal insights into the nature of periodic anti-Ukrainian attacks of European politicians regarding “the failure to comply with the Minsk agreements” or “the urgent need for holding elections in Donbas”.
Needless to say, Germany is interested in the Nord Stream 2 primarily because of its business interests. After all, if it is implemented, Germany will become a powerful gas distribution hub for the whole Europe. In this case, Ukraine and Poland will suffer a huge defeat. Close ties between German companies and the Russian oil and gas business in the long-term strategic projects tightly bind the relations with the Kremlin. And sanctions hinder the work significantly, even in conditions of “Iskanders’ nicker”.
In June 2016, the French Senate by a majority of votes (301) approved the resolution proposing the French Government to mitigate the EU sanctions regime against the Russian Federation. The resolution is of declaratory nature and does not affect the foreign policy which is determined by the President of the French Republic.
However, despite this, in July 2016 at the NATO Warsaw summit, French President Francois Hollande for the first time since 2014 called Russia a partner of his country and stated that Russia is not a threat to France. In her turn, in June 2016, Angela Merkel supported the implementation of the Nord Stream 2appealing to the fact that for Berlin it is solely an economic project to be implemented under the law.
All the aforementioned is pushing for the thought that the European Union will eventually fail the vote on the extension of sanctions. And this will happen sooner than we expect. In the European media landscape, there is no discourse that the Russian party “is making a good hand” of deaths of the EU citizens in wild and inhuman terrorist acts.
Terrible and inconceivable seems the thought that the European big business can actively have its finger in the pie of this “compulsion to cooperation”; nevertheless, the present-day world is exactly like this. And we must be prepared for the fact that while our guys give their lives to defend the “European values”, someone in the EU will use their lives to defend the “European prices”.