Fishing for a German Partner
Where There's Smoke, There's Fire
A picture from the weekend summit in St. Petersburg between the respective Prime Ministers of Italy and Russia, Silvio Berlusconi and Vladimir Putin, showed them standing on a dock, fishing.
The issue of the South Stream pipeline was evidently high on the list of discussion topics. During their meeting, Putin was reported to have brought up the issue of a German company joining the South Stream partnership.
Voice of Russia reported that Putin asked Berlusconi whether he would approve of a German company entering the project.
Berlusconi evidently replied, "As regards the participation of other parties, specifically a German company, I will be a very positive contribution. In this way, the interest of the European Union in the project will be strengthened,"
"Excellent," Putin is quoted as saying in response to the Italian Prime Minister’s comment.
South Stream is a joint venture between Eni and Russia's OAO Gazprom. Electricite de France SA is scheduled to take ten percent from Eni's holdings by year-end.
Putin’s question was not rhetorical: Gazprom intends to keep its 50% stake and the Italian stake would be cut further to make room for a German partner.
Berlusconi he would have to persuade Eni SpA to share its piece of the South Stream pie.
The previous Friday, Putin has told Gazprom chief Alexei Miller that German companies were now considering joining South Stream and that a number of new European firms were showing "great interest" in entering the gas pipeline project.
“I know that some major European companies — which were not part of the project earlier — are already showing great interest toward it,” said Putin, according to the transcript published on the government web site.
Over the past several weeks, numerous reports have circulated that the German partner mentioned is Wintershall AG, a unit of Germany’s BASF.
Rumors first started in late September and comments purportedly made on October 4th by Eni's chief executive Paolo Scaroni renewed the tide of speculation.
The following day saw a denial by Wintershall, saying that said other activities were taking priority.
“For us, the expansion of upstream activities in Russia is paramount," Wintershall said. “Apart from production at source we are also involved in the construction of European infrastructure projects such as the sub-Baltic Sea pipeline Nord Stream ... and in building gas storage facilities in Europe. There are no other concrete projects for the time being.”
In addition to Nord Stream, BASF and Wintershall AG have been cooperating with Gazprom for nearly two decades. Wintershall jointly produces with Gazprom in Siberia.
Yesterday, South Stream Chief Executive Marcel Kramer said that partnership was in talks with German companies.
Kramer wouldn't name any of the companies involved in talks, but said the consortium would welcome a strong new partner.
Over the summer, German media reported that Gazprom had approached German energy company RWE, one of the six shareholders in the rivaling gas pipeline project Nabucco, with an offer to join South Stream.
The approach was reported as an attempt to weaken the European bid for more procurement diversity. However, these reports were quickly dismissed as being the result of a "misunderstanding."
Berlusconi remarked that with a German company on the project, it would definitely get more attention from the European Union. Putin, for his part, said that if major European companies joined South Stream, it would be a truly pan-European project.