Roman Kupchinsky: "Gazprom's European Web"

"For over a decade the proliferation of so-called "Gas Trading" companies in Europe has destabilized the EU energy market and possibly criminalized it as well ... all linked in some fashion to Russia’s state-owned gas monopoly, Gazprom, [these so-called "gas trading companies"] have not added any value to gas transactions in the EU. Furthermore, these companies have been linked to numerous scandals and conflict of interest cases involving high-level officials in the EU."---Gazprom's European Web (February 2009)

Roman Kupchinsky, an expert on Russia and Ukraine with the Jamestown Foundation, has written an interesting booklet titled Gazprom's European Web (February 2009).

Mr. Kupchinsky's biography notes:

From 1990-2002 was Director of the Ukrainian service of Radio Free Europe/Radio Liberty. From 2002-2008 was a senior analyst at RFE/RL. He is the author of numerous articles 0n ... Russian energy and international politics. He edited RFE’s Organized Crime and Corruption Watch...

The executive summary of Gazprom's European Web (February 2009, p. 2-3) observes:

For over a decade the proliferation of so-called "Gas Trading" companies in Europe has destabilized the EU energy market and possibly criminalized it as well. The appearance of such companies as RosUkrEnergo, the Centrex group of companies, Gazprom Germania, YugoRosGas, Eural Trans Gas, Overgas, and others, all linked in some fashion to Russia’s state-owned gas monopoly, Gazprom, have not added any value to gas transactions in the EU. Furthermore, these companies have been linked to numerous scandals and conflict of interest cases involving high-level officials in the EU.

In January 2009 one such company, RosUkrEnergo, played an instrumental role in the conflict between Russia and Ukraine that led to a gas blockade of Europe, causing considerable human suffering and financial damage to the economies of those countries most affected. It is highly likely that had this company not been inserted into the Russian-Ukrainian gas supply-transit chain, the "Gas War" of January 2009 would not have taken place.

The lack of transparency, the practice of hiding the names of beneficiaries, the use of off-shore nameplate companies, and the secretive nature of Gazprom’s contracts with it clients all bode ill for the EU.

In brief, the major findings of this paper are:

The existence of dozens of non-transparent "gas trading" companies established throughout Europe by the Russian state-controlled natural gas monopoly, OAO Gazprom, constitutes a serious threat to the energy security of the European Union.

Some of these middlemen companies have been linked to organized crime groups in Russia and in Europe while others are suspected of laundering millions of dollars into the accounts of high-level Russian, Ukrainian, and other officials. The huge sums involved have a corrupting influence on local government officials and deprive the citizens of their countries of the honest services they deserve and expect from their elected and appointed officials.

Some Austrian and Russian banks have been negligent in conducting due diligence before entering into commercial relationships with such companies and in some cases appear to have been used to launder vast sums of money by these companies.

The highest officials of Gazprom, Gazprom Export, and Gazprombank have been directly linked to these opaque schemes. In some cases they serve on the boards of such companies as directors or as members; in other cases the relationship of such entities to Gazprom management is hidden or explained as an informal "personal relationship."

The EU Commission has failed to recognize the danger that these companies present to the energy security of the EU and has not made any attempt to convince the member states to investigate what role these companies play in the gas supply chain, what value they add to gas transactions, and which, if any, elected officials are linked to these companies.

Russian law enforcement agencies and government anti-corruption watchdogs have consistently refused to investigate the links that suspected Russian mobsters might have to Gazprom and its managers and to the managers and beneficiaries of these intermediary companies.

Leaders of Central Asian countries have long played a role in allowing these companies to be middlemen between their countries, Gazprom, and European consumers. The lack of transparency in these relationships is tolerated by these leaders and other officials and makes them vulnerable to charges of corruption. [Read the full text.]