Newsgroup: it.politica
Titolo: GAZPROM LOSES ITALIAN DEAL, CORRUPTION COULD CAUSE MORE UPSETS

GAZPROM LOSES ITALIAN DEAL, CORRUPTION COULD CAUSE MORE UPSETS
By Pavel K. Baev
Monday, October 24, 2005
Corruption concerns in Italian Parliament scuttle Gazprom deal
The deal signed in May this year between Gazprom and the Italian firm ENI  
was supposed to be path breaking: For the first time, the Russian energy  
giant would receive direct access to the gas distribution market in a  
major European country. It had the full support of Russian President  
Vladimir Putin and Italian Prime Minister Silvio Berlusconi and in fact  
constituted a tangible result of the cordial friendship between these  
leaders. Yet last Thursday, October 20, the two CEOs, Alexei Miller and  
Paolo Scaroni, announced in only a few bland words that the deal was  
cancelled. Gazprom certainly had not lost its appetite for European  
expansion, but the Italian parliament questioned the legitimacy of the  
arrangement when it became known that one-third of the shares in the  
trading company Central Energy Italian Gas Holding (CEIGH) belonged to  
Bruno Mentasti-Grinelli, who happened to be Berlusconi's old friend and  
partner (Kommersant, Politcom.ru, October 21).
Miller was keen to shift media attention towards a much more important  
deal that was crucial for his strategy of "establishing Gazprom as a  
global company" (Polit.ru, October 20). The acquisition of Sibneft,  
Russia's sixth-largest oil company, has just been finalized with the  
appointment of Alexander Ryazanov as its executive manager (Izvestiya,  
October 21). By Monday October 24, Gazprom expects to receive in full the  
unprecedented syndicated credit for this purchase provided by the  
consortium of respectable Western banks, including Dresdner Kleinwort  
Wasserstein, ABN Amro, Citigroup, Credit Suisse First Boston, Goldman  
Sachs, and Morgan Stanley (Financial Times, October 21). Compared with the  
cool $13.1 billion arriving to its bank accounts, Gazprom management  
correctly considers the $200-250 million that CEIGH stood to earn as mere  
peanuts (Vedomosti, October 21).
An additional advantage of the Sibneft deal is that no nosy MPs would even  
think about investigating the money trail towards pockets in high places.  
Sibneft's Roman Abramovich, who is supposed to be the main benefactor, is  
an international celebrity from Chukotka to Chelsea, but his main talent  
is the knowledge about the need to share the wealth with the Kremlin  
cabinet (Ezhednevny zhurnal, September 29). Mikhail Khodorkovsky probably  
was a brilliant manager of his Yukos, but he rebelled against this kind of  
sharing – and he has just arrived at a labor camp in faraway Chita oblast  
(Grani.ru, October 21). The dismemberment of Yukos and  
"re-nationalization" of its assets by a small circle of Putin's closest  
aides has grossly affected the investment climate in Russia and not only  
due to the risk of new "expropriations" of the same kind but also through  
a strong impetus to further growth of a phenomenon that defines the  
essence of Putin's regime -- corruption.
Last week the authoritative Transparency International published its  
annual Corruption Perception Index – and Russia was downgraded from 90th  
to 126th out of 159 ranked countries (Nezavisimaya gazeta, October 19).  
This assessment correlates perfectly with the research findings presented  
by the Moscow Indem Foundation earlier this year and with Russian public  
opinion that defines corruption as the main obstacle to economic  
development (Novye izvestiya, October 19). According to the Indem  
estimates, the average size of a bribe has reached $135,000, and this  
figure appears to be rather conservative. The Tax Service official who was  
detained by the Federal Security Service last week with a million dollars  
in his briefcase had allegedly demanded $3.5 million from the bank he had  
been inspecting (Lenta.ru, October 19). Even President Putin, while  
announcing a package of generous welfare initiatives, had to address  
public concerns that the promised money would just disappear inside the  
overgrown vertical power structure.
According to a recent report from a special mission of the International  
Monetary Fund, rampant corruption and massively increased profits from oil  
exports have caused a slowdown and even a full stop in economic reforms in  
Russia (Vedomosti, October 21). Paul Wolfowitz, the new president of the  
World Bank, refrained from any such criticism while visiting Moscow last  
week. He was all smiles and even tried to say a few words in Russian to  
his interlocutors, including Putin and Prime Minister Mikhail Fradkov.  
That gesture apparently helped him to convince the Russian leadership that  
even if the country were awash in oil money, it still could use some World  
Bank support to reform its judiciary. A new $100,000 credit would not  
miraculously restore the credibility of courts that were deeply  
compromised by the Yukos affair, but it could be a start (Kommersant,  
October 21; RosBusinessConsulting, October 20).
An editorial in Vedomosti (October 21) reminded about the anti-corruption  
operation "Clean Hands" that had radically altered the political landscape  
in Italy in the early 1990s. The business-oriented newspaper acknowledged  
that in present-day Russia two crucial elements of such a penetrating  
campaign – determined prosecution and independent media – were missing.  
Nevertheless, a paroxysm in the opaque but fierce struggle for political  
power could trigger a chain reaction of corruption scandals, so the editor  
invited readers to invent scenarios for a Russian-style "Clean Hands"  
operation.
Gazprom's setback in Italy could provide a clue for such a scenario. For  
years, this state-owned behemoth of a company has worked in close  
cooperation with several German partners enjoying energetic support from  
President Putin. Besides personal friendship with Chancellor Gerhard  
Schroeder, Putin has plentiful contacts in Germany, some of which go back  
to his KGB service in Dresden in late 1980s – and look distinctly  
suspicious (Wall Street Journal, February 23). The forthcoming change in  
the German leadership might bring somewhat less friendly attention to  
these contacts, and a minor revelation of a not entirely altruistic  
relationship could lead to major investigations into Gazprom's strategic  
contracts, from the pipeline under the Baltic Sea to the Shtockman gas  
field.
The point is that a committed effort at cleaning Russian hands could be  
launched in Western Europe, whatever its dependency on energy imports, but  
hardly inside the country. The Bank of New York affair, which has just  
ended with a symbolic fine of $14 million, did send a serious signal to  
the Russian elites in the late 1990s (Lenta.ru, October 21); perhaps, a  
new signal to Putin's courtiers is overdue.
http://jamestown.org/edm/article.php?article_id=2370379
-- 
Ralph Barker
«Il voto a Bolzano ha portato la città ad assumere una funzione  
emblematica,
è il simbolo della riscossa partita da Catania e che ci riporterà, noi
dell'Italia moderata, a tornare in testa alle prossime elezioni».
  berlusconi silvio 30.05.2005


Allthough it is not clear who is the guilty party here ;-)
Apparently the deal is off because Italian MPs have questioned the
deals links with a long time associate of Berlusconi, but the long term
problems relate to the Russian end of the business.
WRT the corruption index cited, Italy ranks 42 on the scale. We may be
behind Hungary and Costa Rica **but** Italy is not the worst country in
Euroland.....thanks again Greece, without you Italy would be the
cesspit of Europe :-)