The Power of RosUkrEnergo

St. Petersburg Times ^ | June 6, 2006 | Yulia Latynina

[Tailgunner Joe]

A month ago, at the residence of Austrian Ambassador Martin Vukovich, Gazprom head Alexei Miller gave European Union ambassadors a dressing down over Britain’s reluctance to allow Gazprom to buy into Centrica, the Britain’s largest gas supplier. Miller stated outright that Gazprom’s strategy in Europe was to control the distribution network market. “Europeans have to accept this,” Miller said. And then, he threatened to sell gas to China if Europe didn’t toe the line.

Last Thursday, at a meeting in Sochi with EU leaders, President Vladimir Putin softened the stance significantly, saying that the Russian and EU positions on major issues were “the same or similar,” and that Russia “would fulfill all its long-term contracts to supply gas, regardless of whether or not there is agreement on the Energy Charter.”

This was an extraordinary about-face. A month ago, Russia was already talking like it had the tentacles of its gas pipelines around Europe’s neck. Now there is a retreat on all fronts: no mention of the “energy superpower,” and no threat to shift supplies of gas to China.

What happened?

Here’s what happened: Right after Miller’s aggressive statement, the United States began to investigate the ownership of the mysterious RosUkrEnergo company, the gas trader with a monopoly on Russian sales to Ukraine. It was revealed that the nominal owners of 50 percent of RosUkrEnergo were Dmitry Firtash (with 90 percent of that stake) and Ivan Fursin (10 percent). You wouldn’t call Firtash a major oligarch. He is known mostly as the representative of EuralTransGas, the predecessor of RosUkrEnergo, which was registered by four individuals in the Hungarian village of Chabdy, and as the head of a branch of Highrock Properties Ltd., a subsidiary of Israel’s Highrock Holdings. The financial director at Highrock is Igor Fisherman, an associate of Semyon Mogilevich, a reputed Ukrainian crime figure wanted by the FBI on racketeering and fraud charges.

Isn’t this amazing? Is it really possible that Firtash’s misfortune is powerful enough to have contributed to the Kremlin’s decision to make a 180-degree turn in its foreign energy policy? Is it just as possible that the Kremlin was worried that investigation would reveal bigger fish standing behind Firtash — perhaps some people a little closer to home?

To be fair, it might not just be the misfortune of a major gas trader, Firtash, that led to such a radical change in the energy superpower’s foreign policy.

Europe is also interested in the telecoms company MegaFon, which has a history painfully similar to that of RosUkrEnergo. A Swiss tribunal ruled that the owner of a controversial stake in MegaFon was IT and Communications Minister Leonid Reiman, countering claims by Jeffrey Galmond, a Danish lawyer who has been doing business in Russia since the 1990s, that the stake was his.

But gas, which is everything to Russia, is more important. Putin cites precise numbers for gas prices to Ukraine and Belarus and at the pipeline gates in Baumgarten, Austria. He cites precise volume figures with an ease that I, for one, have never heard coming out of Firtash.

There are two reasons why Russia cannot blackmail the West with gas. The first is purely economic. Yes, Europe depends on Russian gas, but accounts for just 12 percent of the world’s gross domestic product. Only 4.6 percent of post-industrial Europe’s GDP goes to energy resources, and just 25 percent of that is supplied by Russia. It’s not much. During the reign of Ivan the Terrible, when Russia exported linen and hemp, the world economy was more dependent in Russian hemp than it is on Russian gas today.

A second historical comparison might be simpler. In the Soviet era, nobody would have suggested that the Politburo was depositing receipts from sale of tanks in the accounts of a potential adversary.

[spanalot]

"You wouldn’t call Firtash a major oligarch. He is known mostly as the representative of EuralTransGas, the predecessor of RosUkrEnergo, which was registered by four individuals in the Hungarian village of Chabdy, and as the head of a branch of Highrock Properties Ltd., a subsidiary of Israel’s Highrock Holdings"

I think Israel has to pursue this as does the US. There are too many lives at stake.

[nw_arizona_granny]

Ping.