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The current gas crisis has drawn attention to the actual owners of Germany’s gas storage facilities, which are German in name only. However, few have noticed that Germany’s entire gas system is either directly or indirectly managed by Russians. It took Moscow almost 20 years to acquire German energy assets – writes Mariusz Marszałkowski, editor at BiznesAlert.pl.
Contrary to what one might expect, the Nord Stream 1 and 2 projects are not the beginning of the story of how Russia has captured Germany’s gas market. The process can be traced back to 1993, when Gazprom and Germany’s BASF/Wintershall set up a joint venture Wingas, in which Wintershall held a controlling stake of 65%. Gazprom received 35 percent. It is worth recalling that in the same year, Russian troops left the territory of Poland, where they had been stationed since the end of the Second World War.
Since the creation of the consortium, Wingas has become a major player on the German gas transmission and storage market. Within several years, the company acquired more than 2,300 km of gas pipelines, including major transmission lines, such as the JAGAL pipeline, which receives gas from the Yamal pipeline, or the OPAL pipeline, which was built to distribute gas from the Nord Stream pipeline (now a separate company). In addition, Wingas owned all the major gas storage facilities located in Germany and continued to invest in the construction of new gas facilities. The company also started expansion to other markets, including British, Belgian, French and Austrian.
In 2008, the shares in Wingas were split equally. Gazprom received 49.98 percent, while the share of Wintershall fell to 50.02 percent. A year earlier, Wingas Transport GmbH & Co., a company dedicated to the construction and operation of gas pipelines, was separated from its parent company Wingas. It was later transformed into WIGA Transport Beteiligungs-GmbH & Co.
The Russian-German company was very busy at the of the first decade of the 21st century. On the one hand, in the Baltic Sea, intensive preparations were underway for the construction of the Nord Stream gas pipeline, which was supposed to allow the transfer of more than 55 bcm of gas per year. On the other, such a large volume of gas entering Germany from the sea required massive investments in the expansion of the transmission network in the country. This is why work began on two major gas pipelines – NEL (Nordeuropäischen Erdgasleitung) and OPAL (Ostsee-Pipeline-Anbindungsleitung).
The NEL runs from Greifswald to the west to the Rehden gas storage site near the border with the Netherlands. Whereas OPAL is the southern, onshore extension of Nord Stream, which transports gas towards the Czech Republic. There, through the Gazella pipeline, fuel is transported to Bavaria and Austria. Thanks to these projects, the Russian gas from the Nord Stream pipeline could be transported to Germany’s domestic gas grid, meeting the needs of the German economy, and it could also be re-exported in the western direction, to Belgium, the Netherlands, Luxembourg and France, and in the southern direction, to the Czech Republic, Slovakia, Austria, Hungary and Italy.
In 2012, following the adoption of the EU’s Third Energy Package, gas transport, distribution and storage companies had to undergo the so-called unbundling, i.e. they had to be transferred to separate companies and the job of the pipeline operator had to be taken over by an independent entity.
Wingas became a gas trading and sales company, the assets of Wiga Transport Beteiligungs were separated and transferred to different entities, the NEL and OPAL pipelines were separated, and the remaining assets were incorporated into a newly created company Gascade. Importantly, in the corporate structure, Gascade is owned by WIGA TB.
The owners of this company are BASF and Gazprom, each have a 50 percent share. Gascade subsequently became an independent transmission system operator (SGT) in Germany. The managing directors of Gascade are Chritoph von dem Bussche, a manager with many years of experience at BASF and a Russian (!) Igor Uspenskiy, former deputy director of Gazprom Germania. It is worth stressing once again that Gascade is an independent operator of German gas pipelines. Interestingly, the same tandem also manages the NEL transmission system.
At that time, storage assets were separated and then allocated to Astora. In 2014, the company was fully acquired by Gazprom and incorporated into the remaining assets of the Gazprom Germania group. Since then, Gazprom has become the owner of some of the largest gas storage facilities not only in Germany but also in Austria, the Netherlands and the Czech Republic.
It is worth mentioning that the agreement on the exchange of assets between Wintershall and Gazprom was sealed in the fall of 2014, when bloody clashes continued in eastern Ukraine, and the persecution of the Tatar and Ukrainian minorities began in the annexed Crimea.
In 2015, as a result of the exchange of assets, 100 percent of shares of the company Wingas (which sells gas to, among others, power plants, businesses, public utility facilities, and whose share in the German market is about 20 percent, which makes it one of the largest players in the market of gas trading in Germany) went to Russia’s Gazprom.
In return BASF, as the owner of Wintershall (today Wintershall Dea), obtained, among others, access to a 25 percent stake in two blocks of the Urengoy gas production complex, the world’s second largest gas deposit. More than 240 billion cubic meters of gas are extracted annually there. Thanks to this operation, as well as the shares in the Nord Stream pipeline (and Nord Stream 2), the German company can extract about 10 billion cubic meters of gas annually, paying only the required taxes on extraction and reduced customs duty.
Today Gazprom has an impact not only on storage capacity, but also on the entire transmission network in Germany. The whole operation took almost 30 years, and was facilitated by the German energy business. Of course, Germany benefited from this as well. Thanks to this, German companies have the opportunity to earn profits, either from extracting hydrocarbons in Russia, or selling equipment and necessary technologies to their Russian partners. Russian companies have also counted on political support for years, both from the government in Moscow and from German politicians. Those, in turn, after the end of their political careers, often find a golden parachute, landing in these Russian companies in managerial positions, about which I wrote more here.
Gazprom had prepared the ground for various energy crises years ago. Many countries in Europe did not protest, but actually helped the Russians to implement this plan. This is what the Falin-Kwiecinski doctrine looks like in practice.
