Sunday, July 18, 2010

Russia's Gazprom, Or Why the Russian Spy Story Really Matters

"To conceal its designs, the Kremlin relies on a dizzying web of shell companies nominally owned and operated by Europeans but in reality controlled by Moscow...

Unlike Western firms, which lobby largely in their own interests, Russian state-controlled and private enterprises play an integral role in Kremlin foreign policy.

Surely no Western company would have agreed to lose billions of dollars by cutting off supplies to its customers. That's what Russia's Gazprom did when Moscow twice shut down gas pipelines to Ukraine"---RFE/RL (7-9-10)

Russia-expert Gregory Feifer has an interesting article in Radio Free Europe/Radio Liberty (7-9-10) about how Russia really advances its interests these days:

...[D]ismissing the latest spy scandal as indication the Russians are ineffectually still fighting the Cold War is to miss the big picture. In fact, Moscow is skillfully advancing its interests in the West, not through intelligence but business, often supported by crafty industrial espionage, influence-buying, and under-the-table deal-making.

Since Vladimir Putin took power a decade ago, Russia, the world's biggest energy exporter, has been extending an ever-tighter grip over Europe's energy market by vying for control over the pipeline networks, storage facilities, and utilities that deliver Russian oil and natural gas to European consumers. It has been doing that partly by rebuilding the influence it lost after the Cold War in former Soviet bloc countries that are now members of the European Union and NATO. "Russian energy companies are using their old, communist-era contacts," former Czech Environment Minister Martin Bursik says.

The contacts include lobbyist Miroslav Slouf, a former communist youth leader whose Slavia Consulting company brokered a deal by Russia's LUKoil to supply 20 percent of the jet fuel used at Prague's international airport last year. No other companies bid for the deal, despite a promise by then-Prime Minister Mirek Topolanek to diversify energy supplies. LUKoil's main promoter in the Czech Republic, Slouf also happens to be the right-hand man of popular former Prime Minister Milos Zeman, a social democrat who many believe to be eyeing the presidency.

Fair enough, perhaps -- many officials say Russian companies behave no differently than their Western counterparts. "I don't think ordinary investments from Russia, the United States, Italy, China, Japan, Brazil, Germany, France, or anywhere else are a threat to our national independence," says another former prime minister, Social Democrat Jiri Paroubek.

But others disagree. Unlike Western firms, which lobby largely in their own interests, Russian state-controlled and private enterprises play an integral role in Kremlin foreign policy.

Surely no Western company would have agreed to lose billions of dollars by cutting off supplies to its customers. That's what Russia's Gazprom did when Moscow twice shut down gas pipelines to Ukraine in what looked very much like punishment for Kyiv's pro-Western policies.

Influence By Stealth

To conceal its designs, the Kremlin relies on a dizzying web of shell companies nominally owned and operated by Europeans but in reality controlled by Moscow to attack by stealth. Among them, a gas-trading company named Vemex has taken 12 percent of the Czech domestic market since its establishment in 2001 to sell Russian natural gas. Although there's nothing on Vemex's website to indicate it, the company is Czech in name only. It's actually controlled by Gazprom through a series of companies based in Switzerland, Germany, and Austria, including Centrex Europe Energy and Gas, which has helped spearhead the Russian drive to buy energy assets across Europe.

Centrex is registered in Austria and, according to Gazprom's website, founded by its own Gazprombank. But the company's real ownership is impossible to trace. According to the European Commission, Centrex is owned by Centrex Group Holding Ltd., registered in Cyprus, a company controlled by Gazprom's German subsidiary, and RN Privatsiftung, a Vienna foundation whose stockholders are unknown.

Why go to the trouble of hiding the real owners of companies either already known or believed to be controlled by Gazprom? Vemex is just one of a large number of enterprises Gazprom has set up in countries across Central and Eastern Europe to jockey for stakes in European energy utilities. By disguising the real owners, Gazprom makes its actions more palatable to Europeans wary of expanding Russian influence.

Investigative journalist Jaroslav Plesl points the finger at his own countrymen for enabling Moscow. Czechs are "willing to sell anything," he says of the staggering corruption in his country, something Russian companies have been able to exploit by taking advantage of nontransparent tenders. They also lobby to prevent the development of regulations that would prohibit those kinds of activities, with the effect of exporting the kind of corruption that dominates Russia.

Former foreign-intelligence chief Karel Randak fears there's little that can be done to counter those activities. "If the Russians want to gain control over some strategic assets in the Czech Republic," he says, "they will do it via companies in Switzerland or Western Europe, and no one's able to say the Russians are behind this or that firm."

Commerce As Politics

In Western Europe, Moscow has operated by making lucrative arrangements with foreign energy companies that become de facto lobbyists for the Kremlin within their own countries...[See full text.]

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