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By Philippe Legrain 7 COMMENTS

I don’t usually
have a problem with foreign companies taking over British ones, or with
sourcing supplies abroad. But the British government should block any move by Gazprom, Russia’s state-owned monopoly gas exporter, to buy Centrica, which owns British Gas and
is the UK’s
biggest gas distributor.

Europeans had a chilling warning of the perils of depending
on Russian fuel earlier this year when supplies to Ukraine were briefly cut off for
political reasons. Russia’s actions highlighted that Gazprom is not a normal commercially minded company:
it is the political pawn of president Putin. Its boss, Alexei Miller,
underscored the threat to Europe when he warned EU governments not to thwart
his company’s ambitions to acquire European gas distributors – or Russia would pipe its gas east to China instead.
On Tuesday, Mr Miller made his intentions in Britain clear:

Britain is a very interesting market. We are now discussing a strategy of entering this
market. We are considering strategic partnerships on the
British market and we are also considering buying assets in Britain.

Gazprom is said to be eyeing up Centrica.

Unlike many European countries that already rely on Russia for their fuel supplies, Britain, thanks to the North
Sea, fortunately does not. But North Sea gas is running out and we will soon need to import it instead. Gazprom wants to
seize the opportunity to get a grip on the British market by buying Centrica,
with the aim of controlling both the supply of gas to Britain and its
distribution. The government should intervene to prevent this. We cannot afford
to put our energy security at the mercy of a potentially hostile Kremlin.

Posted 07 Jun 2006 in Blog, Britain, Global Economy
  1. Jose says:

    The UK’s biggest gas distributor is NGT Transco, who owns the gas transporation network and also the gas distribution network (LDZ’s) except for two LDZ’s that it recently sold.
    If Gazprom bought Centrica, it would be buying the major gas supplier, but that is another issue, basically it would be buying a customer base along with some power stations, the Morecambe (dwindling) gas field, Rough storage (a regulated business), and some assets in the US.
    These customers are free to switch (and have been doing so at a faster rate than usual lately anyway given Centrica’s recent price hikes).
    In conclusion I fail to see the logic behind your argument (regarding the security issue of Gazprom buying Centrica), can you please ellaborate a little bit further?

  2. Russian For Globalization says:

    This article is just a brilliant example of the latest typical hysterical publications in the leading Western newspapers like Economist, WSJ, Washington Post, The Times etc. about ‘hostile Kremlin, energy blackmail by former KGB agents, paws of Putin’s antidemocratic regime, lack of freedom of speech’ and all this kind of bullshit stamps. Sounds like paranoia, don’t you think? Who buys it? I’m sure normal people in the world are already sick and tired of this stupid propaganda, and you know, all these so-called DEMOCRATIC LIBERAL NEWSPAPERS sometimes really remind me the main USSR’s propaganda mouthpiece newspaper Pravda in the 70-ies – coldwar cliches and double-standards are in action… It could be funny reading but it’s too sad – such articles really poison normal relations between nations…
    for your information:
    http://www.atimes.com/atimes/Central_Asia/HF08Ag01.html

  3. Philippe Legrain says:

    I think Putin wants Russia to become Europe’s main supplier of gas in order to exercise leverage over European governments, or to put it less kindly, in order to be able to blackmail them into doing what he wants. Britain is currently immune to such pressure, because we buy no gas from Russia. If Gazprom is allowed to buy Centrica, Russia will doubtless become a major supplier of gas to Britain. It might very well make it financially attractive to do so in the short term, with the ultimate aim of holding Britain to ransom. Note that Gazprom is also interested in buying the only gas pipeline linking Britain to continental Europe.

  4. Russian For Globalization says:

    Dear Philippe,
    may I ask you – why do you think Putin is going to use gas supplies for blackmailing? Do you have any facts proving your point? Please could you present them? But please don’t tell me about ‘poor’ Ukraine – they payed $50 per 1 cubic meter since 1992, ignored any public warnings from Gazprom about new market reality and finally, when the contract expired in 2006, they declined to sign new price $230 based on world market level (but anyway much less than you pay in UK) – so Gazprom had to stop gas supplying (I wonder what BP does in such situation) – and Ukraine just started stealing gas going through its territory to European countries under long-term agreements with Gazprom… So, was it a blackmail from Putin? Why should Russian tax-payers subsidize ($3.5 billions per year) a foreign country who claim to be independent, self-sufficient and going to join EU?
    I am not a ‘putinist’ at all, I never voted for Putin, but it’s just unfair to blame people for crimes and evil intentions having no serious arguments…

  5. USARussian says:

    There is a far more significant reason for blocking Gazprom from buying Centrica, the simple one is that the Russian government blocks most cross-border mergers, i.e. if they will not allow us access to their markets why should we grant them access. There was an excellent article in Vedomosti on the 27th of June about this.
    The most obvious reason for Gazprom (being a state-owned monopoly) wanting to dominate the European gas chain is to exert political pressure on those dependent on its gas – because Russia has no other means to do so – it is piss weak country (the armed forces currently occupied with trying to enforce the territorial integrity of the Russian Federation), the economy is more dependent on European money than the Europeans are dependent on Russian natural resources (Russian cannot at present sell them to anyone else because they have not invested in the infrastructure to do so, they have not invested in their own internal infrastructure so the likely event is that they will be unable to honour their current committments anyway (still as stuipid as the commies) – so fuck ’em). What’s more they are dependent on Western Technology to exploit their reserves because they are so useless at developing technology (apart from military tech, but their training is so poor it would not matter if this tech was the best in world they wouldn’t be able to use it effectively). Their economy is still a mess. despite this being hidden by the export of natural resources (which accounts for 85% of Russia’s GDP) – inflation is consistantly running above 10%!!! You can see Russia as a new Saudi, but with far less powerful friends – trying to punch above it station because they think they deserve it – when in reality they deserve little more other than to be ridiculed and ignored.
    All the real talent in Russia left it years ago.. What’s left is useless bureaucrats and petty minded, corrupt society.

  6. Russian Insider says:

    USARussian – looks like you are an immigramnt, eh?
    Let me give you the opinion from inside of Russia:
    things have been definetly looking up here for last 5 years, and it’s just stupid to deny this fact.
    First, Russian military forces are not so ‘weak’ as you think – especially in its strategic component (new best-in-class inter-continental ballistic missiles Topol-M and new generation nuclear submarines are coming every year, and it’s reality – check open sources). New military aircrafts (by Sukhoy and MiG) are not so bad too – look at the last airshow Farnborough in UK. And also you said, ‘the armed forces currently occupied with trying to enforce the territorial integrity of the Russian Federation’ – it’s not true again – there is only one military brigade left in Chechnya (staffed only by contracted militants), and main work of finding and killing chechen terrorists are done by FSB, spetsnaz and local Chechen militia (‘good’ chechens fight against ‘bad’ ones – I love this game).
    Second, our economy is not dependent on European money at all – we even don’t want their money, because we collect so much for oil and gas that it speeds up the inflation! but European companies are more and more knocking on our doors – ‘we bring you money, please, let us in’! our government has to save big part of oil and gas money abroad – what other evidences do you need?
    And about infrastructure – we DO invest in the infrastrucure – the main investments are going in the infrastructure: take North-European Gas pipeline for example (which run by German ex-cancelor Gerhard Schroeder if you don’t know) or Far-East Oil Pipeline (4-5 years and we will sell gas and oil to China directly). I don’t even mention titanic projects like Sakhalin-2 and Stockmann…
    You have so old and obsolete info about Russian economy – I just wonder where did you spend last 5 years – in the deep forest? Export of natural resources is not 85% of Russian GDP – who told you this? it’s just 20% – check in the open sources, all this info available in the Internet! Economy is growing, and the main growth is in construction, IT and retailing industries, not in the oil and gas!
    Yes, inflation is high due to oil and gas money flooding my country, it’s almost 10% per year, but the income growth is 20-30% each year, so real income increase for average citizen is 10% per year at least. Just a small fact – people in Russia have to wait up to 6 months for a new car – demand greatly exceeds supply!
    I live in Russia and never think to move elsewhere, because life here is full of opportunities and people are just great.
    And if ‘ talents ‘ like you leave my country – I’m absolutely happy :))))

  7. Bob Vucen says:

    Dear Phillipe,
    Your article is explicitely showing a very typical way of thinking here in the UK.
    You would like to “globalise economies of whole the world”. You would like to have again colonies from where you can legally take out everything you want (not need necessarily – but want). You would like Britans to “manage the world” and to run their politics and slaves to work.
    Eh, Mr Legrain, this is now a past tense and you and your kids will have to pay for (everything) what your grand-grandfathers have done and please be happy, because the times when your children or granchildren will start “paying back” what Tony Blair have done in the name of “democracy” and “better future around the world”, in fact what he has done for American’s 150+ Billion £ pumped every year to British economy.
    That bill is going to be a very heavy one Mr Legrain, so that the fact that Britain haven’t got their own Energy industry, but it is Centrica, EDF, RWE, E-on and Gasprom who are transfering British pounds Chinese are taking over British Car industry, Indians are running British Heavy Industry and just starting selling their brains and high quality products to you Phillipe will be negladgibale.
    You probably thought that “outsourcing” of the large banking ICT structures and cutting the overheads is a good idea. And as an idea it was not that bad, however every penny British financial and other companies saved by outsourcing will be paid back with at least “50% interest”.
    So, Mr Legrain, you are probably very much right thinking as a citizen of powerfull empire, nevertheless the reality will teach you that Mr Roman Abramovic didn’t buy Chelsie because of extraordinary qualitY of their footbalers and BMW haven’t bought british Rover because of great engineers and other employees etc,

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