Saturday 11 August 2007

Easier Than Lenin Thought

Here’s another in our regular series for Ellee and all who have half an ear for the sound of tanks coming up the road. Don’t enjoy the thought of Sovereign Funds buying up the world? How about an even more clever strategy – Sovereign Resources being used simply to ask for it to be handed over.

Talk this week has been of Gazprom ‘eyeing UK power stations’. Current German owner E.on (Powergen to us), keen to curry favour in Moscow, had offered up some Hungarian assets. Not good enough for our hegemonic Russian friends, who have declared for some choice items from E.on’s UK portfolio.

Needless to say, there will be no cash on the table: that’s not the Russian way. No, E.on will be invited to see great value in a ‘stake’ in some remote gas field, (the gas from which they will be required to buy anyway), and accept this in return.

What’s more, they will be told to get their skates on, because Gazprom’s latest best friend, don’t you know, is Total of France, who also this week have been honoured to be allowed to sink a fortune in another old friend - Russian pet project, Shtokman. How much joy Total will derive from this remains to be seen (have a word with BP and Shell, guys) – they may not even be allowed to ‘book the reserves’ which means a lot to oilmen.

Lenin used to say that capitalists will sell you the rope with which to hang them. Turns out, it’s even better – they’ll give it to you.



Anonymous said...

The whole glasnost and perestroika thing has always been a fake Mr Slicker... they haven't changed -only the tactics...

Steven_L said...

I've been writing about Sheikh Hamad becoming our local greengrocer today.

I must admit, it all seems a bit one way this free market stuff. It's not as if we can bomb China or Russia either.

Then you've got the Arabs and their price fixing cartels - that's hardly free market either.

Globalisation will throw a lot of political challenges our way.

Mark Wadsworth said...

Who cares who owns our power stations?

They are still on UK soil and under our control, are they not? We still have regulators regulating them, they're still employing people and paying tax.

If worst comes to worst we can always confiscate them, can't we?

CityUnslicker said...

Mark we can. i think the danger that ND points out is deeper, it is what we power them with.

The only sustainable track for us is to ramp up renewables and nuclear; this removes the gas and oil weapon from the Russians and Arab states.

Nick Drew said...

Steven - it's not only oil exporting nations that have a dubious approach to free markets: France and Germany spring to mind.

And (following on from your own post), much European rejection of the 'Anglo-Saxon' market model is linked to rejection of the 'New York financiers' market model - which in turn is only thinly-disguised anti-semitism.

Nick Drew said...

Mark - sorry to tag-team you like this! I don't mind UK assets being held by anyone who is more-or-less playing the market game (I more-or-less include the raft of French / German / Spanish energy co's involved - and their behaviours are slowly improving in this regard).

Nor do I greatly object to dumb Sovereign Fund money overpaying for UK assets (& believe me we are going to see a lot of that). They don't have much of a practical political agenda, and will probably hire / retain UK management to sweat the asset like anyone else would.

But there are other dangers.

'Some' potential owners (shall we say) have zero interest in obeying market rules, may very well have a political agenda, and long before the regulator catches up with them can do harm.

And it makes me weep to see big, & supposedly worldy-wise European companies (upon which, to hear French & German politicains speaking, we rely for for our security of energy supply) being suckered so easily into 'strategic investments' (= enormous punt with no serious prospect of a secure return, and political risk written all over it). At very least, our pensions are on the line when these players go into 'strategic' mode & start giving stuff away.

Mark Wadsworth said...

But Nick, very good points, if it's foreigners wasting their own money who cares?

As to obeying market rules, what's your worst case here? Let's say some wicked Russians and Saudis buy up some of oil and gas fired power stations. Of course they'd make bloody sure that those power stations get supplies of oil and gas, so that gives us better security of supply.

Will they hold us to ransome with high electricity prices? Wouldn't a regulator just slap a price cap on them? Also, wouldn't this make renewables and nuclear relatively more competitive? Or worst case, we can just confiscate their pwoer stations again.

Is this any different to OPEC pushing up oil prices by restricting supply? Which makes North Sea oil and good old British Coal (of which we have enough for centuries) competitive again.

Maybe I am a tad naive, but I just can't get worked up about this.

Anonymous said...

Putin appears to be growing madder than Stalin. Bumping off his adversaries using radioactive material seems to have pushed him over the edge.

Still, he and the Chinese have moved too fast and too strongly. They have exposed their motives and steps can readily be taken to stop them in their tracks.

Nick Drew said...

Mark - depends on the scale, of course, but above a certain size, actions at the margin can have a significant effect over the whole

Even the vastly more liquid Brent oil market has not been immune from 'problems' which have not been caught by regulators

Gas and power markets are comparatively thin

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