On the 28th of September this year anti-monopoly bodies of European Commission searched the offices of 20 Central European and Western European companies. Gazprom subsidiaries in Germany, Austria, Czech Republic, Baltic States and Poland were concerned, too. List of searched companies includes German giants like Е.ON and RWE, Polish state concern PGNiG and EuRoPolGaz. The system of transit Yamal-Europe gas pipelines coming through Poland belongs to the latter one.
Europe strikes Gazprom
Euro-bureaucracy may be chaffed upon, but should never be underestimated. Euro Commission inspectors were gravely serious their job. During the search cell phones of all employees were blocked, content of computer hard drive and all the paper documents were copied. Brussels press-release was brief and vague: “Commission investigates the possible violations of free competition rules in the area of gas supplies for the EU members in Central and Eastern Europe”. The EU sanctions for violating the antimonopoly legislation are anything but playful:
In 2002 the EU Antimonopoly Committee announced that it fines the construction companies — French Lafarge SA, German Knauf GmbH, Belgian Gyproc and British BPB Plc — €478 million for participation in a cartel collusion.
In 2003 German antimonopoly authorities fined cement-producing companies — French Lafarge, Swiss Holcim, German HeidelbergCement, Dyckerhoff, Schwenk Zement and Readymix — €660 million on the charges of colluding about the production volumes.
In 2004 Euro Commission assessed American software developer Microsoft for €497 million, having directed it to sell Windows OS without a pre-installed media player.
In 2008 the EU Antimonopoly Committee fined Microsoft again for €899 million. The same year Euro Commission sentenced four glass producers — Japanese Asahi, British Pilkington, French Saint-Gobain and Belgian Soliver — to pay a fine of €1.3 billion for a cartel delusion.
In 2009 Euro Commission assessed American CPU manufacturer Intel of €1.06 billion for hindering the freedom of competition and also fined European energy companies — German E.ON Ruhrgas and French GDF Suez — €1.106 billion.
In 2010 Euro Commission fined Indian-Luxemburg metallurgic concern ArcelorMittal and 16 other companies €518 million.
Fines are quite considerable even for such giant as the Gazprom. According to the new European antimonopoly legislation fine amount is calculated from the company incomes, i.e. the turnover. According to numerous European experts, monopolism charges against Gazprom are not that solid from the legal point of view. The matter of fact is that the most part of European gas supply contracts were signed before the new antimonopoly legislative acts were adopted and deciding, which laws should the Old Continent consumers and suppliers be guided by, is — putting it mildly — a debatable question. Euro Commission might have authorized the morning calls to the offices of Gazprom subsidiaries and partners on the basis of the third EU energy package, considerable severing the antimonopoly legislation.
Until recently Euro Commission had no access to the specific details of the old agreements. We’re aware of situations when the governments of state-consumers, purchasing Russian gas, denied Euro Commission of a right to get acquainted with these documents. For instance, last year such incident took place in Poland. Polish government told Günther Oettinger, European Commissioner for Energy, that purchasing prices of Russian gas are the commercial secret and Mr. Oettinger had to return empty-handed. Now, though, thanks to the said searches, European Commission will get the information about all the secret details of gas bargains. Alexandre Shtok, Director of the 2 K Audit-Business Consulting/Morison International departments, believes that European Commission might have authorized this operation on the basis of the third EU energy package, considerable severing the antimonopoly legislation.
It is beyond any doubt that the attack on Gazprom has been justified by quite a number of factors, which include plenty of political ones, too. Yet, there are no unequivocal phenomena in the nature. In order to figure this mystery out or, at least, deduce the main reasons for “encroaching upon Gazprom”, we have to analyze the economic and political events that preceded the unprecedented actions of Euro Commission.
Fukushima, Gazprom and squaring the circle
Consequences of an accident at the Japanese Fukushima nuclear power plant happened to be more global, than it was expected. Even the distant Europe fell one of the catastrophe victims. Efforts of the Greens, who fought the nuclear energy for years, have finally been rewarded.
German government decided to completely give up the use of nuclear power plant by 2022. Bundestag and Bundesrat adopted the respective legislative acts in June and July of this year.
The majority of German experts admit that the decision was made under the emotional pressure of Fukushima and hasn’t been grounded by substantial calculations. Despite the assurances of Angela Merkel that giving up the nuclear energy is a huge chance for German economy and that “the nuclear power plants will be closed little by little, once the guaranteed supplies of other energy resources are secured”, most Germans have all the grounds to apprehend the high electric energy prices, instable supplies and deterioration of ecology. Responding to these fears, the government repeats its words about the new role of German industry in the creation of Green technologies all over again — the latter are to become the flywheel of a new industrial boom and the new export commodity of Germany. Until these mellow times are not here, though, electric energy will mostly be produced from coal and natural gas, imported from Russia.
Having a speech in front of the Bundestag deputies on the 9th of June, 2011, Chancellor Angela Merkel admitted that the state program for creation of “new energy supply architecture” reminds “squaring a circle”. Here are but a few economic and social consequences of the FRG abandonment of nuclear energy.
In March of 2011, German government decreed to stop 8 nuclear power plants with their aggregate power of 8 GW. By the end of 2022 more nuclear power plants with their combined power of 20 GW, are to be stopped. About 30% of electric energy in Germany is produced at the nuclear power plants. According to varying estimates, contribution of the renewable energy source (the so-called Green ones) makes up 10 to 17%. Optimists claim that by 2020 this number may go as high as up to 38% thanks to building large wind-powered plants and development of solar energy technologies. Until then electricity production at the gas and coal power plants is to go up, given the increased energy import from France and Poland. All of that is to be accompanied by the whipped development of power grid. Approximately 4450 kilometers of power lines are to be built in Germany by 2020. For now no one has calculated the costs of brining the new German Energetic Strategy 2020 to life. Apparently it is to cost dozens billion euros. German industry is not that cheerful with those decisions. It apprehends the bolstering of the energy prices, unstable supplies of energy resource, substituting the nuclear power plants and ecological consequences — in the FRG the latter ones have an economic substance of the СО2 emission certificates, which are to be paid for. The first consequence of the decision to close nuclear power plants was the nosedive fall of RWE, E.ON and EnBW stock prices. Lobbyists have enlivened as well. Manufacturers of the renewable energy equipment, united into the proffesional unions like Bundesverband Erneuerbare Energie[1], municipal power grid providers and Lands, hosting the Green equipment manufactures also wished to take a part in creation of anti-nuclear legislation. North Rhine-Westphalia demands to build up the coal production, which is to become the foundation for the transient techology of new-age energy supply. Long story short, the layout of political and economic life in Germany has profoundly changed
German abandonment of the nuclear power plants will destabilize Europe
In regard to the ban on nuclear power plants in Germany the aforementioned European Commissioner Günther Oettinger claimed that “the gas will be the engine of economic growth, because more renewable energy sources mean more gas”. Price Waterhouse Coopers CEO Ronan O’Regan echoes him:
“The gas will be necessary as insurance for the times, when wind is not blowing and sun is not shining”.
The former FRG Chancellor Gerhard Schroeder explains where gas is to come from:
“We need gas to replace atom and it can only be supplied from where its deposits are. We can buy it from North Africa, from Iran (but with certain restrictions) or from Russia (without any)”.
During his June visit to Moscow German Vice Chancellor and Minister of Economics Philipp Rösler has already negotiated about increasing the gas supplies and Alexey Miller assured him of the regular and steady gas supplies, along with Gazprom desire to purchase the stock of RWE and E.ON, which are having some hard financial time right now. On the 14th of June Gazprom signed a memorandum of strategic partnership with RWE regarding the construction of gas and coal power plants in Europe. Russian investments into the German energy market have always been an important issue of Russo-German governmental councils in July. Right now Gazprom currently supplies about 40% of gas to the German market and controls over 20% of the FRG gas market through the partnership with German energy concerns. If it succeeds in purchasing the stock of German companies, up to 50% of this market may end up in the hands of Russian company.
Ban of the nuclear power plants operation in the FRG is significant not just for Germany itself. French government demanded to hold a special counsel of the EU Energy Ministers to discuss the stability of energy supplies to the EU. Export from Germany is vitally important for such regions of France as Brittany and Provence along with countries like Belgium, Holland and Austria. Experts already forecast that the next step of German fight for greater safety will be the reconsideration of the EAEC[2] up to including the beefed up nuclear power plant safety requirement into the European Constitution — the Lisbon Treaty. This treaty was signed on the 13th of December, 2007 and has nearly provoked the collapse of the European Union. Each clause of it caused such fierce debates that many people have lost their faith into possibility of its signature. Trying to add any changes into it today means breaking an already fragile stability of the United Europe. France, known for its commitment to the nuclear energy (and the second country after Germany, ideologically, economically and politically cementing the EU) will hardly meet German initiatives with rejoices. That is the high price of Fukushima accident and that’s how unforeseen may its consequences be.
(To be continued)
[1] Federal Union of Renewable Energy Sources[2] European Atomic Energy Community (or Euroatom)
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