Wednesday , 12 June 2024
Home Global Economy The power of the Gazprom concern
Global Economy

The power of the Gazprom concern

How powerful is Gazprom? Many German consumers who heat with gas are asking this question in view of the Russian troop deployment on the border with Ukraine. There are fears that if Russia cuts off the gas supply to the Europeans because of new sanctions, there could be serious bottlenecks on the energy market – with direct consequences for households.

Because the Gazprom group sits on the largest natural gas reserves in the world and controls the German gas market. The Russian world market leader delivers a good 272 million cubic meters to Germany every day. And if the new Baltic Sea pipeline Nord Stream 2 goes into operation, there should be even more.

Several gas storage facilities and transmission networks

In Germany alone, Gazprom operates several gas storage facilities. The largest of these is in Rheden, Lower Saxony, which the Russian group bought from the BASF subsidiary Wintershall Dea in 2015. It is operated by the subsidiary Astora. Gazprom has shares in three other gas storage facilities – at the Etzel and Jemgum sites in East Friesland and in Haidach near Salzburg.

Some of the networks are also in Russian hands. Gazprom, together with Wintershall Dea, is involved in four transmission systems. The most important joint venture is Nord Stream AG, based in Zug, Switzerland, which operates the Nord Stream 1 and 2 pipelines. Gazprom holds a 51 percent stake in Nord Stream AG. The rest is shared by Wintershall Dea, PEG Infrastructure, which belongs to E.ON (15.5 percent each), as well as the Dutch NV Nederlandse Gasunie and the French utility Egie (9 percent each).

Gazprom currently has more than 170,000 kilometers of pipelines. The Russians use them to supply a total of 30 countries with natural gas.

Wingas as the central sales company

Gazprom is not only mining the scarce raw material in Russia. The group also uses natural gas in the Netherlands – together with Wintershall Dea. The German BASF subsidiary has become the most important partner for the Russians. Wingas, which was jointly founded in 2015, is now 100 percent owned by Gazprom. "Wingas serves Gazprom as the central sales company in Europe and is of major importance," says Heiko Lohmann, an employee at the energy specialist Energate.

Almost 515 billion cubic meters of gas were produced worldwide in 2021. That was almost 14 percent more than in the previous year. Gazprom boss Alexej Miller speaks of the best year since 2013. He expects the best financial result in history. According to Gazprom, 60 percent of export volumes are linked to gas prices on the spot markets.

Ex-Stasi officer as head of the pipeline company

Germany is one of the most important sales markets. More than ten percent more natural gas was sold there in 2021. The German business controls the subsidiary Gazprom Germania. The boss (CEO) of Nord Stream 2 AG is Matthias Warnig. The former high-ranking Stasi officer is considered an old friend of Russian President Vladimir Putin. Warnig rarely makes public appearances, sometimes only in the stadium of second-division soccer team Schalke 04. The manager sits on Schalke's board of directors – after all, Gazprom is a sponsor of the Ruhrpott club. This costs the group a good 15 million euros a year.

Gazprom's most important connection to German politics is probably through Gerhard Schröder and his network. The former Chancellor of the SPD is Chairman of the Shareholders' Committee of Nord Stream AG and President of the Board of Directors at Nord Stream AG. Schröder will soon be on the board of directors of the Gazprom group. He is to replace Timur Kulibayev, a son-in-law of former Kazakh President Nursultan Nazarbayev, from the end of June.

Supervisory Board as an extension of the Kremlin

Schröder will hardly have any great influence there. "The independent members of the supervisory board fulfill a purely decorative function," Russia expert Janis Kluge from the Stiftung Wissenschaft und Politik in Berlin told "Gazprom's supervisory board implements the Kremlin's decisions. It is dominated by members of the Russian government and Gazprom managers."

The actual strategic decisions are made in Moscow – by President Putin. "It's not the supervisory board that's decisive for Gazprom's management, it's the appointments with the Russian president," says expert Kluge. After all, the Russian state owns the majority of Gazprom with 50 percent shares plus one share. Putin helps determine how much gas the company supplies abroad.

His executive hand is Gazprom boss Alexej Miller. The 60-year-old, who is considered a close confidant of Putin, has been at the helm of the Gazprom group for a good 20 years. He converted it from a pure gas producer to a conglomerate.

Billions in revenue from broadcasters and banks

Gazprom no longer earns all of its money from natural gas. In order to be less dependent on fluctuating raw material prices, the group is now also involved in the media and finance business. Gazprom Media owns nine national TV channels, 29 special interest channels, ten radio stations and two publishing houses. Gazprom's media business generates a good 1.2 billion euros.

Since 1990, Gazprom has also had its own bank: Gazprombank. It has retail and commercial banking, an investment banking division, and foreign exchange and commodity trading divisions.

Narrow limits in corporate politics

But Miller is likely to be anything but free when it comes to corporate decisions at the top of the group. When Russia forcibly nationalized the TV station NTW, which was critical of Putin, Gazprom Media had to incorporate it. And in the domestic Russian natural gas market, Gazprom has tight pricing limits.

There are also historical reasons why the Kremlin largely determines corporate policy. Gazprom was once a purely state-owned company. It emerged in 1989 from the Department of the Ministry of Gas Exploration and Gas Transport Industry of the Soviet Union.

Decisions against commercial logic

Even today, Gazprom is not a purely commercially driven company striving to maximize profits, says energy expert Mikhail Krutichin from the Moscow agency RusEnergy. There is also a second political Gazprom that sometimes acts at the expense of commercial interests. According to estimates, the group could have delivered at least a third more natural gas to Europe in 2021, but did not do so for political reasons.

Gazprom has been on the stock exchange for several years. But the interest of major investors in the share has cooled down significantly in the meantime. The rate has more than halved since 2008. Recently, however, the stock made up ground again. In 2021, the title won almost 70 percent.

We have corrected a first version of this article – and made it clear that Matthias Warnig is the boss (CEO) of Nord Stream 2 AG, not of Gazprom Germania.

Leave a comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Related Articles

Global Economy

Spotlight on 2023: S&P 500 and the Significance of the 4400 Level

In our past exploration of the financial landscape of 2023, we delved...

Global Economy

AI and Data Analytics Drive Efficiency in Money Laundering Detection

BIS Innovation Hub Turns to Tech for Money Laundering Detection The BIS...

Global Economy

Russell 2000 Gains Momentum as Tech Stocks Outperform Value

Tech stocks have dominated the equity markets in recent months, surpassing value...

Global Economy

Crypto Exchange Bybit Announces Exit from Canadian Market Amid Regulatory Changes

Regulatory Shifts Prompt Bybit's Strategic Withdrawal from Canadian Crypto Market