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Silvio Berlusconi (left) is responsible for the southern branch of Vladimir Putins gas project.
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Dec. 24, 2005
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The Putin and Pals Project
The whole Europe may soon find itself in Russias gas hands if Gazprom is successful in its expansion in the West. The Russian authorities have already started building up a mega corporation to be headed by Vladimir Putin and his confidants among world leaders.
Until recently, the Kremlin viewed headstrong European leaders as the most uncomfortable and unpleasant partners to deal with. Europe leveled criticism about Chechnya and freedom of speech. Vladimir Putin often found it easier to come to terms with Asian leaders like Hu Jintao and Mohathir Mohamad or even Latin Americans like Ugo Chavez than with old friends like Aleksander Kwasnewski or Tony Blair.

But things have changed. When Vladimir Putin arrived at the Russia-EU summit in London in October, he was greeted with cheers everywhere. Critics have clammed up. European leaders listened with awe to the Russian president speaking about the energy safety, and they were two hands for his offers to save Europe from the impending gas shortage.

Only journalists were still holding distrust. A French correspondent asked Putin at the press conference in London if Europe would become too dependent on Russia.

You should be happy! I cant even understand what you are talking about! the Russian president replied firmly.

The German Manager

The North European Gas Pipeline is the first project that the Russian president granted to Europe. The construction agreement was signed between Gazprom, BASF and E.ON on September 8 in the presence of Putin and former German Chancellor Gerhard Schroeder, the presidents closest friend of all his European counterparts.

The signing ceremony was held ten days before federal elections in Germany. The Chancellors party was already evidently losing, so Russians were in a hurry to sign the contract while Schroeder was in power. The ruling party failed indeed.

Once the stir about the new German government hushed and the former chancellor lost all chances to stay in power, it was announced that he would continue to supervise the construction of the North European Gas Pipeline: Schroeder took helm of the committee of the shareholders of the North European Gas Pipeline Company (NEGPC).

Switzerland-registered NEGPC will run the construction and management of the pipeline. Gazprom holds 51 percent in the company, German E.ON and BASF share 24.5 percent each. Under the agreement, Gazprom will keep the controlling stake in the joint venture, while the stake of each German company may be reduced to 20 percent. If the company was registered in Germany, the share could be reduced to 16.33 percent. This stipulation is essential for the fourth company to enter the project, even though it would not be able to get more than a 9 percent stake. Gaz de France, BP, Transco and Gasunie are mentioned among would-be partners.

Gazprom is set to build the first section of the North European Gas Pipelines by July 2010 and put it into the planned capacity of 55 billion cu. meters, which will increase gas supplies to Europe by one-third.

The decision to construct the pipeline caused a great public excitement in Europe firstly because the region is on the verge of the energy crisis by 2010. Gas reserves in the Northern Sea are running out, while the production in Norway and the UK is declining. Therefore, a new source of gas from Russia by the North European Gas Pipeline would be a salvation for the Old World countries.

The European Commission approved the project right away. Belgium, the Netherlands and the UK expressed their interest. European governments said that they were willing to let Gazprom in into the gas distribution in their countries. Dutch Gasunie suggested using the Bangzand Bactorn Line pipeline (to be built in 2006) as the route for the supply by the North European Gas Pipeline from Germany to the Netherlands and further to the UK. The construction of pipe-bends to Switzerland and Finland are also envisaged.

Such grandiose plans mean that NEGPC may hold the biggest gas transportation system in Western and Northern Europe as soon as in five years. The company will be kept under Gazproms control, which mean under Vladimir Putins too.

For the ambitious plans to come true, the company badly needs the charismatic and Europe-known Gerhard Schoeder. The excessive dependence on Russia may still be keeping Europe distrustful. Things that governments and business are raving about may seem not that rosy to parliaments, society and mass media. The reputation and authority of the former chancellor will be of help here.

The Italian Manager

Putins second European project has progressed even further that the newly born North European Gas Pipeline. However, it has not become that global yet.

The construction of the Blue Stream gas pipeline, the joint project of Russia, Italy and Turkey, started back in 1997. By 2002, the last branch was stretched to the Turkish town of Samsun. The pipeline is 1,213 km long comprising two branches with the annual capacity of 16 billion cu. meters.

Vladimir Putin, Silvio Berlusconi and Turkish Prime Minister Recep Erdogan gathered in Samsun in November for the ceremony of the official launch of the pipeline and announced their development plans for the first time.

Putin mentioned the possibility of the South European gas ring to boost gas supplies in Southern Europe. Gazproms head Alexey Miller specified that there are plans to stretch the Blue Stream through Greece to Southern Italy. It will require the construction of a third branch of the Blue Stream, which will bring the operating flow to the annual 24 billion cu. meters.

These plans are not that grand as the North European project. It all has so far turned on Turkeys buying far less that it promised to, causing serious problems in the last three years as the pipeline was not working at its full capacity. If Gazprom is successful in securing contracts in Southern Europe, the formation of the South European Gas Pipeline would be soon to come.

The North European pipeline was mostly born by the political will and friendship of Putin and Schroeder, while the Blue Stream is the brainchild of Putin and Berlusconi. The Italian Prime Minister is a close friend of the Russian leader, known to combine both politics and business. Besides that, he is a strong supporter of Putins initiatives and has a steady interest in the gas industry. This May, Gazprom and Italian Eni signed an agreement on direct gas supplies for Italian consumers. Italian mass media later found out the prime minister had his private interest in the deal. Gazprom picked Central Energy Italian Gas Holding (CEIGH) as a partner delivering gas to Italy. CEIGHs 33 percent belongs to the Italian Mentasti-Granelli, the rest is owned by Gazproms subsidiaries. Mentasti-Granelli pertains to Bruno Mentasti Granelli, the old friend and associate of Silvio Berlusconi, who is reputed to act in his interest.

The deal was denounced due to the spreading scandal. The parties, however, did not hide the fact that they would go back to signing a new agreement again, and CEIGH is likely to be kept Gazproms partner for gas supplies to Italy.

Gazprom will evidently take part in the stretching of the Blue Stream to Italy. Eni and Turkish BOTAS are already bound by a contract to build a pipeline with the operating flow of 8 billion cu. meters from Turkey to Greece. Gazprom, however, offered its services in the project.

It is possible that the Blue Stream project will mirror the North European Pipeline project. Italy is to host elections in Italy where Berlusconis party stands no chances to succeed. After the defeat, the Italian prime minister would be able to join the gas project personally and not through Mentasti Granelli. He may also become the head of CEIGHs board of directors, the superintendent of Gazproms southern networks and Putins confidant in Southern Europe. In this case, the whole Europe will find itself energy dependent on Russia sooner or later, and Moscow will be able to speak with it in the vein as they do with the CIS countries.

The American Manager

Gazproms expansion in the West actually means that the Russian authorities are presently involved in the creation of a mega corporation which soon gain control of the whole Western Europe. Features of the corporation evidently prove the fact that it will be built on the Putin and Pals principle where world leaders, who enjoy the favor of the Russian president (Schroeder and Berlusconi are of the kind), could be junior partners.

George W. Bush is believed to be another friend of Putin. Personal relations between the two leaders have always been warm despite clashes between the two nations. Therefore, George Bushs part in the Putin and Pals mega corporation will be quite logical too.

It became known last week that Donald Evans, the former U.S. secretary of commerce, was offered the chairmanship of Rosneft. He met Gazprom CEO Alexey Miller and President Vladimir Putin on his recent visit to Russia. It was Putin who suggested that the American take helm of the board at the state controlled oil company which was already rumored to be soon merged with Gazprom.

Donald Evans is not just a former U.S. secretary of commerce. He is also a close childhood friend of George Bush who headed up the Bush-Cheney 2000 campaign raising a record-high sum. It was Evans who led the incumbent U.S. president to the religion giving him the everyday Bible divided into 365 sections. It was Evans who helped Bush give up drinking. Evans and Bush were born on the same day. Celebrating their 40th birthdays they got so messy drunk that in the morning they made up their minds to break with drinking for good.

Donald Evans can be called the confidant of the current U.S. president. Therefore, his appointment as the chair of Rosnefts BOD may mean only thing: the U.S. president is at least in the know about the creation of the Putin and Pals venture and he probably does not mind joining it.

So the answer for the question what Vladimir Putin is going to do after 2008 is quite evident. The Russian president cannot give up the creation of the mega corporation half way. At least, he will see through the North and South European projects and will make sure that Europe is under the control of right people. It does not matter what this European giant will be called Gazprom, MegaGazpromneft or International Consortium of Ex-Presidents. If the plans go through, the head of this corporation may feel unwilling to run for the Russian presidency in 2012 it will be too petty for him.

Mikhal Zygar

All the Article in Russian as of Dec. 19, 2005

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