Some people are annoyed and even furious by each successive wave of cables released by WikiLeaks. Writing in the Washington Post, Charles Krauthammer even suggested that founder Julian Assange deserved to be assassinated by a poison dart, a la Georgi Markov.
Putting aside all the serious legal issues and the need for confidentiality in conducting statecraft, I am personally finding the cables tremendously entertaining – and so are the world’s newspapers, by the way, whose mock disapproval is contradicted by the popularity of their exclusive first looks.
While it is true that much of what is being revealed is generally public knowledge to those who follow these countries closely, it has been edifying to see some verification and back up with regard to a number of issues we have been warning about here on this blog for the past several years. However, it’s also very surprising to me how so many reporters have missed the big story revealed with regard to Vladimir Putin and Silvio Berlusconi’s energy dealings with Gazpromneft, and what this shows us about both states’ handling of unlawfully expropriated property.
One cable in particular describes a “direct line” between Putin and Berlusconi, which allowed the Italian premier to intervene in a business deal, and request that Putin push Gazprom to pay Italian energy giant Eni full value for its 20% stake in oil producer Gazpromneft in the Spring of 2007.
The cable details the following (emphasis mine):
3. (C/NF) XXXXXXXXXXXX said the Italian Embassy is organizing a visit by a trade and investment delegation to Novy Urengoi, the Yamal region city that is a project site of Severenergia, an upstream joint-venture between Gazprom, ENI, and Italy’s Enel. Gazprom bought a controlling stake in Severenergia from ENI and Enel, which had set up Severenergia to purchase some of the assets of the former Yukos oil company at its bankruptcy auction. XXXXXXXXXXXX said that in addition to its investment in Severenergia, Enel also has approximately $6 billion invested in the Russian electricity sector and may raise its investment in that sector to $9 billion. (…)
4. (C/NF) XXXXXXXXXXXX also noted that ENI XXXXXXXXXXXX and “we” (presumably the Italian government) have regular contact with Russian DPM and “Energy Czar” Igor Sechin. XXXXXXXXXXXX said that lately the discussions relate to an explicit business link between South Stream and the proposed Samsun-Ceyhan Turkish oil pipeline, of which ENI is the operating partner. He explained that ENI, and its Turkish partner (which he said is Turkish PM Erdogan’s son-in-law) need Russian oil to make Samsun-Ceyhan a reality, while Gazprom needs Turkish cooperation to move ahead on South Stream.
More important than Berlusconi’s machinations to extract fair market price from Gazprom is how Eni and Enel go their hands on this asset in the first place – and the ties to Igor Sechin, who personally benefited more than anyone from the seizure of Yukos, help to explain how the influence was exercised. For such a valuable oil production asset, you’d think that the Italians would have to outbid a variety of eager bidders … not so – they were the only companies brazen enough to even submit a bid for these assets stolen from Yukos shareholders. All other companies had shied away given the lack of proper title, and the Russians were eager to have foreign participation to legitimize the auction process. Eni, along with the pressure of Putin’s pal Berlusconi (and, to an extent, Romano Prodi as well), became the perfect patsy to stand in and help launder the stolen property.
I wrote the following in an article published in 2007 in the Financial Times:
Meanwhile, the Kremlin has engaged in an activist foreign energypolicy to co-ordinate activities with other energy exporters, resultingin a further carve-up of markets and fewer supply options for Europe.The most tangible result of these efforts was the 2006 memorandum ofunderstanding between Gazprom and Algeria’s Sonatrach, whichtheoretically puts 69 per cent of Italy’s natural gas imports under thecontrol of one distributor, marking the beginning of the gas cartelcontroversy.
Italian consumers were alarmed by the agreement, and even PaoloScaroni, the chief executive of Eni, warned in Brussels that an alliancebetween the top three or four gas exporters would be more powerful thanthe Organisation of the Petroleum Exporting Countries.
Then, at the end of last year, Eni signed a big deal with Gazprom,making it the company’s number one customer in the world. Subsequently,last June, Mr Scaroni and Romano Prodi, Italy’s prime minister, invitedRussian officials to Rome to announce the signing of the South Streampipeline project, dealing a deathblow to the competing Nabucco pipeline,which was designed to increase diversity of suppliers to Europe. Eni’spress release at the time stated that the project “will significantlycontribute to improving the security of energy supply for the EuropeanUnion”.
Briefly holding control over 20% of Gazpromneft appears to have just been a bonus part of the deal – a transaction which I described as Eni becoming the first victim of Russia’s gas OPEC. Keep in mind that we predicted that Eni would only be a temporary holder of these assets in order to help clear title, only to sell them right back to Gazprom – the CEO even stated publicly that the company had no intention to sell. But then they did, and in doing so, helped to launder the title of the Yukos expropriations. Insofar as Berlusconi taking a cut from the transactions, he has already issued a denial, and further, that rumor came from the Georgian ambassador in Rome, who could be argued to have an interest in tainting Russia. Nevertheless, we are gaining a clearer picture of how Putin used his close relationship with Italy to help break the law and steal, extend the energy weapon against European security interests with South Stream, and build up the state’s control over the economy.
Just don’t say we didn’t warn about all this three years ago.