"“We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.” "

Chinese premier Wen Jiabao 12th March 2009

""We have a financial system that is run by private shareholders, managed by private institutions, and we'd like to do our best to preserve that system."

Timothy Geithner US Secretary of the Treasury, previously President of the Federal Reserve Bank of New York.1/3/2009

Friday, January 18, 2008

Putin and his gang extend energy interests and ownership

Bulgarian Prime Minister Sergei Stanishev (currently entertaining President Putin and his gang - including First Deputy Prime Minister Dmitry Medvedev, Gazprom's chairman and the man Putin has nominated to succeed him) will sign up today for a 50% share of the trans Bulgarian section 0f the The South Stream project (transit deals are definitely out) , proposed by Russian gas export monopoly Gazprom (GAZP.MM) and Italy's Eni (ENI.MI) . This is Moscow's challenge to a rival Nabucco plan to pipe Central Asian gas to the European Union and reduce the bloc's reliance on Russian energy. (Windows media video presentation)

The Russia-Bulgaria pipeline on the seabed of the Black Sea is designed to circumvent both Ukraine and Turkey. An option that strengthens Russia’s leverage in negotiations with those transit countries - with the Ukraine’s case, it will increase Putin's leverage to demand partial control of Ukraine’s transit pipelines in return for not reducing transit volumes through the Ukraine. It was at the “energy summit” on June 24 2007 in Zagreb, that President Putin held a bilateral meeting with Bulgarian President Georgi Parvanov to draw Bulgaria into the South Stream project. Russia’s account of the meeting claims that Georgi eagerly accepted.

This agreement will bring the EU member state 1.4 billion euros in cash and a role in a regional energy hub and probably other financial benefits to Bulgarian interests.

Bulgaria will also sign up for a Russsian built nuclear plant Sofia News Agency18 January 2008, Friday - Bulgaria, Russia Sign 8 Memoranda during Putin's Visit
See below for more on the nuclear deal.

South Stream will carry 30 billion cubic metres of gas 900 Km. under the Black Sea, emerging on the Bulgarian coast to continue through one of two routes - through Greece and reach Italy, or pass through Romania, Hungary, the Czech Republic and Austria before arriving in Italy.

South Stream - which was a sealed deal from June 23 2007 when , ENI Chief Executive Paolo Scaroni and Gazprom Vice-Chairman Alexander Medvedev signed a memorandum in Rome of an understanding to build a gas pipeline from Russia to Italy , joined by Energy Ministers Pierluigi Bersani of Italy and Viktor Khristenko of Russia . Through this and other deals the Kremlin seeks to become the political manager of an energy supply system for Europe under conditions of tight or even deficit supplies in the medium / long term.

South Stream significantly increases Russia’s options to play consumer countries and various national energy champions in Europe against each other. One element is that by planning to build surplus pipeline capacities as an element of export strategy - enabling the Russian bear to switch export directions for large hydrocarbon volumes ( euphemistically described as “flexibility,” ). These surplus pipeline capacities (if built as planned ) will enable Russia to switch supplies -- favoring one or another direction, country, or national champion -- according to a system centrally managed from Moscow.

The Nabucco proposals are central to EU efforts to diversify gas supplies away from Russia - On June 28, 2005, the five partner companies of the international Nabucco gas pipeline project - Botas, Bulgargaz, Transgaz, MOL and OMV Gas - signed a joint venture agreement for the full term of the project at their General Assembly in Vienna. But Bulgaria, torn between proving its EU credentials and maintaining its renewed ties with Russia, is eager to diversify its gas sources by being a partner in Nabucco but is also attracted by South Stream because of lucrative transit taxes.

The upstream sources for South Stream could be gas from Siberian and Central Asian. At the Rome meeting on June 23rd Medvedev spoke interchangeably of Russian gas and Gazprom-owned Central Asian . ENI , who opened direct access for Gazprom to distribution systems and end consumers in Italy, bought (was allowed to) ArcticGaz and Urengoil the Siberian gas-producing companies in April 2007, when the Russian government auctioned the last assets of Yukos.

Russia's state-owned Atomstroyexport are ready to design and build two twin 1000 MW units ready for use in 2014/5 - and Putin said "We have set aside EUR 3.8 Bn. for the needs of the Belene power plant in the Russian Federation budget and we are ready to make the funds available if they are needed," after meeting Georgi Parvanov.

Head of Russia's nuclear agency Rosatom, Sergey Kirienko, part of Putin's gang on his trip, said that Atomstroyexport expected to build 2 more reactors in the future.

Bulgaria plans to pick a strategic investor (Short-listed bidders - Czech CEZ, German E.ON and RWE, Belgian Electrabel and Italy's Enel) for 49% in the company that will operate Belene by mid-2008 and has said it would use the cash to fund part of the costs.

Bulgarian national power grid operator NEK, owning the remaining 51%, has to pick the bank that will arrange the financing for the construction of the power plant.

Currently the EUR 250 M bridge loan is with BNP Paribas any dealys will mean the need to fallback on up to EUR 600 M from EU's Euratom agency and the European Investment Bank (EIB), with the cabinet / Bulgarian state underwriting both loans.

Elswhere Vagit Alekperov's LUKoil who reported increased annual profits this week of US$8 Bn. will soon become the owner of TGK-8, one of the the largest power generation companies in southern Russia. The financial group IFD Kapital, which is co-owned by LUKoil Vice President Leonid Fedun, acquired the electricity company's shares placed during an additional offering and the sale of the state stake in TKG-8 in October. To pay for TGK-8 shares, the financial group sold $1.262bn worth of bonds convertible into LUKoil ADRs.

Ferran Tarradellas Espuny, spokesman for European energy commissioner Andris Piebalgs said when asked about the Russian / Bulgarian deal "... we consider Nabucco a priority project, rather than South Stream, because it will diversify not only the transport routes, but also the supply sources," .. who is currently up to his neck in proposed EU legislation to limit imports to the EU of biofuels.

You may not like the ruthless Mr Putin and his silovaki - but only a fool would not admire how he and his gang are relentlessly and entusiastically peforming an end run around EU energy planning.

UPDATE Tuesday 22nd Jan
The Guradian have a Reuters story today Caspian uncertainty biggest threat to EU gas scheme - Reuters Tuesday January 22 2008

It concludes ...

"The construction of a Trans-Caspian pipeline linking Azerbaijan and Turkmenistan that could provide an independent route to the West has been frozen by conflicting claims between the two over reserves in the Caspian.
Meanwhile Iranian gas, which Turkey has offered to supply for Nabucco, has been turned down by Brussels, as the Islamic Republic is subject to United Nations sanctions over its nuclear programme. Iran has a poor track record as a supplier due to underdeveloped infrastructure. "

1 comment:

Stef said...

You may not like the ruthless Mr Putin and his silovaki - but only a fool would not admire how he and his gang are relentlessly and entusiastically peforming an end run around EU energy planning.

striking ingratitude from the Russians - after all the good things we did for them after The Wall came down

(C) Very Seriously Disorganised Criminals 2002/3/4/5/6/7/8/9 - copy anything you wish