Two interesting pieces of news coincide today from the sordid world of Russian energy politics. First, permissions to build the 403-meter "Gazscraper" tower in St. Petersburg were muscled through local government by Valentina Matvienko over the protests of preservationists, while hours later news came down that Italian firms Eni and Enel had finalized the sale of $1.6 billion worth of former Yukos assets back to Gazprom, which it had originally acquired in a controversial rigged auction.
Back when the auctions of Yukos assets were taking place (which was
illegal in the first place under Russian bankruptcy law, which calls
for non-core assets to be sold first), it was alleged that the lack of
foreign participation by oil majors and non-Russian state-owned
companies was due to the fact that the due diligence didn't add up -
that these assets had bad title and would become the subject of future
litigation. This lacking credibility led the Kremlin to rope in
several high-level foreign energy companies to act as stand-ins, either
pretending to bid on assets that they clearly wouldn't win, or actually
acquire properties which would then later be resold back to the
government, who had rightfully stolen it in the first place.
That's what we saw in the past - though Eni claimed to have plans to keep possession of their Gazpromneft stake (laughable), and that's what we're seeing today with SeverEnergia, as the Italians passed that critical 51% control of the business over to the state. (Have you ever wondered how it is that Russia ends up owning just 51% of so many energy companies?) BP experienced similar entrapments to get proximity to power and greater safety from expropriation for its investments in places like Kovykta, and was cornered into a $1 billion investment in Rosneft before the IPO.
The plans for Gazprom's eyesore, which has been compared to the misguided "Ulbricht's Needle," will likely cost the great historic Russian city its World Heritage Site status from UNESCO. The transactions with the Italian companies provides a barefaced admission of what we saw coming from the similar "asset laundering" operation by major Western companies: that the state's destruction of Yukos, imprisonment of Mikhail Khodorkovsky, and subsequent theft of the company to enrich the very people who originally engineered the show trial will no longer be hidden or spun as anything less than what it is.
To see both Putin's Needle go forward against the will of St. Petersburgers as well as the Italian participation in a massive theft of property, well, it's a real double poke in the eye. Notwithstanding the progress which could be made in the latest Yukos suit filed in New York against Rosneft, or the implications outlined in a public letter I signed to shareholders of Gazprom, Rosneft, Eni, and Enel, it is a pity that not a greater level of political attention is garnered in Europe over these open violations of law.
Photo: Russian Prime Minister Vladimir Putin (2nd L) and Gazprom chief executive Alexei Miller (L) listen to Italian energy mayor ENI's chief executive Paolo Scaroni in the Novo-Ogaryovo residence outside Moscow January 15, 2009. (Reuters Pictures)
That's what we saw in the past - though Eni claimed to have plans to keep possession of their Gazpromneft stake (laughable), and that's what we're seeing today with SeverEnergia, as the Italians passed that critical 51% control of the business over to the state. (Have you ever wondered how it is that Russia ends up owning just 51% of so many energy companies?) BP experienced similar entrapments to get proximity to power and greater safety from expropriation for its investments in places like Kovykta, and was cornered into a $1 billion investment in Rosneft before the IPO.
The plans for Gazprom's eyesore, which has been compared to the misguided "Ulbricht's Needle," will likely cost the great historic Russian city its World Heritage Site status from UNESCO. The transactions with the Italian companies provides a barefaced admission of what we saw coming from the similar "asset laundering" operation by major Western companies: that the state's destruction of Yukos, imprisonment of Mikhail Khodorkovsky, and subsequent theft of the company to enrich the very people who originally engineered the show trial will no longer be hidden or spun as anything less than what it is.
To see both Putin's Needle go forward against the will of St. Petersburgers as well as the Italian participation in a massive theft of property, well, it's a real double poke in the eye. Notwithstanding the progress which could be made in the latest Yukos suit filed in New York against Rosneft, or the implications outlined in a public letter I signed to shareholders of Gazprom, Rosneft, Eni, and Enel, it is a pity that not a greater level of political attention is garnered in Europe over these open violations of law.
Photo: Russian Prime Minister Vladimir Putin (2nd L) and Gazprom chief executive Alexei Miller (L) listen to Italian energy mayor ENI's chief executive Paolo Scaroni in the Novo-Ogaryovo residence outside Moscow January 15, 2009. (Reuters Pictures)
