Not the first energy war, obviously, but as we're on the dawn of a new era let's move on. I wouldn't normally post about one company buying a share in another, it's not the sort of thing that generally interests me very much. The case of the Russian oil company Lukoil attempting to become the owner of around 30% of Repsol is a bit different, as political considerations vie for supremacy with economic ones and the potential entertainment value rises. The fear that it all forms part of an evil Kremlin plot by the "Russian bear" to control Europe's energy supplies has inevitably surfaced in the last few days. The fact that Lukoil itself is partially owned by US interests doesn't seem to affect this perception.
At the heart of the proposed deal lie the problems of debt facing Spanish construction companies. The case of Sacyr-Vallehermoso is particularly grim, they owe several times their stock market worth to the banks. It's a staggering level of debt that can't even be temporarily kept at bay by handing over newly finished houses to the banks; a solution that is being adopted by other troubled companies. So instead they are seeking to offload their 20% stake in Repsol in order to at least reduce that debt burden and keep the company going. If the deal goes ahead Lukoil won't actually be paying a penny to acquire their stake. Instead they'll just take over the debt that Sacyr incurred in the process of "buying" their share of Repsol. This was done back in the not so distant days when the construction companies were awash with money and developed grandiose expansion plans into other sectors such as utilities or energy.
I wonder just how many of Spain's ardent free marketeers will be screaming for government intervention over this one? Talking of the devil, also related to Sacyr's situation was a curious court appearance last week by the former Partido Popular general secretary Francisco Alvarez Cascos. Around the election campaign in March, there were a spate of rumours originating inside the PP that Sacyr was already bankrupt but had been persuaded by Zapatero to defer the announcement until after the election so as not to adversely affect the campaign. These rumours were spread by SMS text message and one such message sent to a friend of Cascos was found to have come from a phone belonging to one of his companies. Nothing to do with him you understand.
At the heart of the proposed deal lie the problems of debt facing Spanish construction companies. The case of Sacyr-Vallehermoso is particularly grim, they owe several times their stock market worth to the banks. It's a staggering level of debt that can't even be temporarily kept at bay by handing over newly finished houses to the banks; a solution that is being adopted by other troubled companies. So instead they are seeking to offload their 20% stake in Repsol in order to at least reduce that debt burden and keep the company going. If the deal goes ahead Lukoil won't actually be paying a penny to acquire their stake. Instead they'll just take over the debt that Sacyr incurred in the process of "buying" their share of Repsol. This was done back in the not so distant days when the construction companies were awash with money and developed grandiose expansion plans into other sectors such as utilities or energy.
I wonder just how many of Spain's ardent free marketeers will be screaming for government intervention over this one? Talking of the devil, also related to Sacyr's situation was a curious court appearance last week by the former Partido Popular general secretary Francisco Alvarez Cascos. Around the election campaign in March, there were a spate of rumours originating inside the PP that Sacyr was already bankrupt but had been persuaded by Zapatero to defer the announcement until after the election so as not to adversely affect the campaign. These rumours were spread by SMS text message and one such message sent to a friend of Cascos was found to have come from a phone belonging to one of his companies. Nothing to do with him you understand.
12 comments:
Oddly enough, I used to teach the head of Lukoil in Azerbaijan. Really, they are not even a big shot in the Russian Oil world, Gazprom dwarfs them and when I was working for them, they were drilling empty holes in the Caspian basin. I wonder if their fortunes have turned...but it is funny to watch the free-marketers become protectionist when it serves them politically.
Who was it that privatized Repsol in the first place? Hmmmm....
Perhaps even more interesting than the question of who privatised Repsol might be the story of how it became Repsol YPF. If you have'nt seen the film Memoria del Saqueo I think you can find at least a good part of it on internet.
Hi Graeme,
Sorry but I think you are widely off-beam -agai). I don't know what Conoco-Phillips is doing in Russia, but I am sure it ain't an awful lot. Perhaps, you would care to read this article from "The Guardian" in order to know what sort of place Russia really is like:
http://www.guardian.co.uk/media/2008/nov/24/anna-politkovskaya-russia-press-freedom
So what exactly did I get wrong Moscow, I don't find any references in my piece to Russia being a pleasant place? If we are going to stop one company buying a piece of another because the buyer may not be a good person then what remains of the world economy will quickly go down the tubes.
You got it wrong in the sense that you underestimate the threat that Russia poses. You got it wrong when you put in doubt that Russia -it's government - is evil, and it has evil designs on the future of Europe. You got it wrong when you said that Lukoil is a private company. It is so only nominally. You got it wrong when you state that Lukoil buying a stake in Spanish company is not such a bad idea. It couldn't be a worse one. Now, I'm not saying that Repsol in Spain is free to do what it wants. I believe it should, but that is that, unfortunately. But the Spanish government, for all it's faults, poses no visible and tangible threat to other countries. Zapatero, for all his weaknesses, is a democrat. None of this is true of Russia. You could argue that Russia is trying to defend itself, it feels insecure or under threat. They used to say the same about Stalin. Actually, I could go on about this for ages, but it is striking how much today's Russia resembles Franco's Spain in the 60s. I was only a child when Franco died, but nevertheless. And YOU wouldn't want to dispute that Franco's regime was evil, wouldn't YOU?
Calm down a bit Moscow, you are attributing opinions to me that I haven't expressed and which I don't hold. In any case, whilst Putin is undoubtedly a nasty piece of work he is not Stalin or Franco - at least not yet. I think its more complicated than the broad brush way you paint it, Russia is making its presence felt again and those who appear to accept this sort of behaviour from other countries seem to get particularly alarmed over Russia doing it. Before you accuse me otherwise, I don't support the Russians bullying their neighbours or attempting to play the superpower game, but to describe it as if it has the most evil government on the planet is to simply ignore the other candidates. I don't think every move they make on energy policy has to be seen as quite so sinister, it's not going to be Russia holding the world to ransom - they operate in a multi supplier market as far as energy is concerned and that creates as much interest in stability as it does in sowing chaos. In that context, a Russian oil company bidding for a non-controlling stake in a foreign oil company doesn't have to be seen as part of a great plan for world domination.
Perhaps if people had taken more notice during the 90's when much of Russia's wealth was systematically ransacked by a few in the name of "structural adjustment", events since might have taken a different course.
But Graeme, don't you know how this works? If you don't support one extreme, it means that you obviously support another in the minds of some.
If you think that the constitution should be followed and that crosses should be removed from public schools, then that obviously means that you are an islamofacsist who would like to see all Christians themselves crucified.
If you believe in a secular state, you are obviously in favour of Stalin.
If you don't support the "war on terror", you cheered when the planes smashed into the towers.
If you think that "free marketers" should play by the rules that they profess...
Well what does that make you then?
There is only good and evil in this world when seen through dualistic eyes, black and white.
We can do so because we are the good guys...right?
Graeme,
You don't seem to get it. Of course, there are nastier guys than Putin. That guy in Corea, for example. But that is not a benchmark. There is not much point in dragging on about this one, but, please, in what sense is Putin's Russia different to Franco's 60s Spain? As I said I was only a child when Franco died, but I am pretty sure that know the answer. Do you?
I wasn't really thinking about Korea Moscow, the Chinese example would be be my point of comparison. If a Chinese company was to buy an important stake in a major Spanish company tomorrow would that make you as alarmed? If not, why not? There are numerous important differences between Putin and Franco, although the Chechens would be better placed to argue the other side of the coin.
Ok. Granted. The Chinese are also suspect. But I don't live in China. And what has that got to do with Putin anyway? I repeat, there is very little difference between the Putin regime and the Franco regime. The similarities are striking. And no, I don't think the Franco regime was in anyway more criminal, bad, evil, whatever you want to call it, than Putin's. Absolutely not.
PS: If it were only the Chechens....
Moscow, I spent enough time in China to be able to say that I lived there and at times I felt the same about the Chinese government as you do about the Russian one; especially every time they lobbed a "test" missile over Taiwan. The nationalism combined with a sense of historical grievance made a dangerous combination. Now, years later and with a bit more distance I don't feel it so much and to be honest if a Chinese company takes 29.9% of Repsol I'm not going to be very alarmed.
At an abstract level you could probably compare any government with authoritarian tendencies to Franco, but in reality both the way in which he came to power and the way in which he exercised it are quite different from Putin.
I am back from 2 weeks in China. I know about 100 symbols, and 200 words in Chinese, and this is only my second time there. Therefore, let's assume I know nothing about China. I bow to your extended knowledge on the subject.
Russia is a different matter. I have lived here for ten years, and my Russian is almost native.
Yes, Putin came to power in a different way than Franco. The way he did it is actually much more the way Hitler did it, although the Nazis went on about strangling democracy at much greater speed. Here Yeltsin's semi-democracy was choked to death on slow-motion, over an extended period of 8 years. But, like the article in the Guardian cleverly stated, the ruling elite knows a thing or two about keeping appearances- we are in 2008 after all and, thank God, we've got the internet. There is a 18th century Russian precedence to this (keeping appearances I mean: the Potemkim Villages.
Nevertheless, the level of civil liberties matches that of Spain in the 60s. Some things are better: there is certainly a lot more sexual freedom. Women are perhaps in some ways freer than they were under Franco. There are no political prisioners - as such- to speak of (Khodorkovsky and a few others might disagree). But the level of general violence and brutality is much higher. And corruption, is on scale that dwarfs even that of some African coutries. And of course, Russia is inmensurably more corrupt than Spain under Franco.
This is a society that has ditched democracy in favour of stability and security and wealth. Spaniards in the 60s endured the dictatorship because it brought economic growth and stability, and because Spaniards were still traumatised by the civil war and the ensuing repression. The same way that Russians are still traumatised by the fall of the Soviet empire and the ensuing tumultuous period of strife of the 1990s.
I finally gave up hope on Russia becoming a democracy around 2003. There was always some glimmer of hope before that. I think now would have been a good time to open up a bit. But nope, things are going further into reverse.
There is a special report on Russia in The Economist. It is on-line. I know the British press is particularly negative on Russia. There is a bit of propaganda war going on there. But I'd say the report is about 75% absolutely correct. It's a harrowing picture. So much, that perhaps I won't wait for Fraga to kick the bucket after all.
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