MINISTERS RATTLED BY GAZPROM’S ADVANCES

Lragir.am
17 April 06

The Financial Times published information April 16 that the UK
considered changing its merger control regime this year to block a
potential takeover of Centrica, the UK’s biggest gas supplier, by
Gazprom of Russia, a move that remains an option to thwart any bid
that threatens energy security. Alan Johnson, the trade and industry
secretary who has been a vocal critic of protectionism in the US and
Europe, was briefed with other ministers in February on the legal
changes required to allow them to block a rumoured bid by Gazprom
for Centrica, the Financial Times has learnt.

The problem was no policy had been formulated to deal with a move by
Gazprom into the UK market.

The standard policy on potential takeovers was clear – the government
removed itself from mergers in 2003, when the Enterprise Act came
into force, delegating decisions on almost all deals to independent
competition authorities.

The UK has made a virtue of this lack of political interference,
which has allowed several utilities to be taken over by European
Union companies with no political discussion and barely a murmur of
public dissent.

Alan Johnson, trade and industry secretary, used a speech to the
British Chambers of Commerce this month to boast of Britain’s open
energy market. “Downing Street’s electricity is supplied by a French
company, the water is supplied by a German company and there is
a choice of four gas suppliers, three of whom are foreign owned,”
he said.

But should this laissez faire approach to foreign takeovers extend to
Gazprom? A takeover of Centrica, which owns British Gas, or Scottish
Power, another rumoured potential target, could have competition
implications.

Malcolm Wicks, the energy minister, warned this year that the UK’s
liberalised market was “not about creating a big oligopoly”. It would
look “a bit odd if, in a few years’ time, this market resembles a
monolithic oligopoly with a few companies state-owned but not by
Britain,” he told The Observer.

Ministers’ concern focused instead on the implications of a Gazprom
takeover for security of supply. The gas company’s decision earlier
this year temporarily to cut off supplies to Ukraine was seen by some
as politically motivated. The prospect – however seemingly remote
– of Russia using ownership of a UK gas supplier to try to exert
political influence rang alarm bells in Whitehall.

The UK’s increasing dependence on gas imports has moved such
geopolitical threats to energy supplies sharply up the political agenda
since 2003, when the government’s energy review largely ignored the
issue. The review of energy policy now under way has put security of
supply centre stage. Asked by MPs this year about central issues for
the review, Mr Johnson cited “this geopolitical question”. “Where are
the oil reserves? Where are the gas reserves? Can we be sanguine about
the future if…? A large amount of our gas will come from countries
which are perfectly stable … but these are issues which have grown
in importance,” he said.

P.S. It is the right moment to recall our reality. Our energy suppliers
are part by part taken over by Gazprom, and each time defining the
takeover as the century’s deal, the RA government did not even utter
a word about the energy security of Armenia. If a developed country
such as U.K. is cautious in relations with Gazprom, it is already a
forceful argument.