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Austria, gas and the big bad Russians

April 1, 2009

Could an Austrian oil and gas group with more than 41,000 employees, some 25.5 billion euros turnover and a presence in more than 20 countries actually be a secret front for Russian gas giants, extending their tentacles of power into Europe?

It could be if you believe Zsolt Hernadi, the chairman of Hungarian rival MOL, not to mention some scary headlines about Russian gas in the British press.

Earlier this week Austria’s OMV sold a 21 percent stake it held in MOL to Russian oil group Surgutneftegaz for 1.4 billion euros ($1.9 billion), double the amount the stake was worth as stock. The stake was originally bought from … a Russian family Almost half of the stake was originally bought from … a Russian family.

“Suspicion arises … that because the Russian investor bought this stake at exactly the (initial purchase) price, it (OMV) was just a front,” Hernadi told a Hungarian parliament committee.

The sale came just days after OMV’s chief executive said he did not plan to let go of the stake this year, fuelling speculation there was an ulterior motive behind the swift deal, finalised in the middle of the night on Sunday.

“Sometimes the markets offer opportunities you have to take,” OMV’s spokesman said. The sale also came after a miserable takeover attempt by OMV, which was repelled by the Hungarian group at every twist and turn.

The European Commission warned on the deal last year, saying it could create big competition problems and lead to higher prices. OMV eventually withdrew its $23 billion bid. Unofficial talk among EU officials has also highlighted worries about OMV’s Russian connections.

But doesn’t selling the stake just make good business sense? And if OMV is a Russian lapdog, why is it spearheading a consortium for the Nabucco pipeline, a project aimed at diversifying European supplies of gas away from Russia?

Well, Russia’s hold on energy supplies is an ever-sensitive issue. A spat with Ukraine over payments escalated into a two-week supply shutdown earlier this year, hitting parts of Europe and underlining reliance on Russian gas.

So Russia and OMV-bashing gets some sympathetic ears, even if MOL’s Hernadi said in 2007 that his company would be better off in the hands of the Russian firms than OMV.

Russia, for its part, may not have been keen to see a consumer of its oil fall into hostile hands.

Surgut, believed to have around $19 billion sitting on its balance sheet as of September 2008, could probably afford to pay a healthy premium. Investors, who have begged the company for years to put its cash in play, rewarded it with a rise in its stock price.

OMV has been doing business with Russia’s Gazprom since 1968, describing the oil giant as a “reliable partner” even during the last gas row.

It has to toe a fine line. While it relies heavily on Russia for some of its big contracts and for developing a major gas hub, it is also keen to push the Nabucco project, emphasising all the while that the plans are not politicised and certainly not anti-Russian.

Nabucco’s managing director told me late last year that the consortium does not worry about where gas comes from, as long as the sources are diverse – Iran, even Russia, are possibilities, it is about pragmatism, not politics, he said.

Most analysts think of the MOL stake sale as purely pragmatic too, ignoring the politically-charged comments from Budapest. “The price is favourable as OMV has achieved close to a 100 percent premium to MOL’s share price at the close on Friday,” UBS analysts wrote in a research note. “The deal eases liquidity worries at OMV.”

But whether OMV is just pragmatic or secretly a Russian puppet, this is unlikely to be the last time it gets drawn into the politics of energy.

Comments

Any nation that controls the energy supplies required by other nations wields tremendous power. Given the lack of transparency of corporations, such power in their hands is multiplied.

The great dependency upon fossil fuels that must be imported is an energy delivery/production model that is obsolete. Solar power, wind power, hydrogen cell generators and the lot should be the model for powering 21st century homes, business and industry. Residences can be fitted with one or more of these devices just as manufacturing facilities and warehouses.

Current power grid technology is way to inefficient. There would be great cost in upgrading that as well. Predictably the cost of cleaner electricity on the grid would be to expensive to attract it’s use in most societies. The big power companies are just one more large special interest group supporting oligarchs and the politicians they give contributions to.

We can achieve real energy independence. We should not do it with a big business/big government type of approach.

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