"Economic Nationalism" Confronts "Resource Nationalism"

A fascinating dance is underway between producer and consumer countries, as they both dress up for the ball. In this case the Europeans are trying to consolidate its power to fend off the Russians, in a classic confrontation between "economic nationalism" and "resource nationalism" - two terms that that have only recently become part of our daily lexicon.

James Angelus


GdF and Suez talk up Gazprom threat

By Martin Arnold in Paris

Gaz de France and Suez brandished the threat of increased competition from Gazprom, the Russian energy colossus, as they sought to bolster political support for their merger to create a European energy champion.

Gérard Mestrallet of Suez, the Franco-Belgian utility, and Jean-François Cirelli of state-owned GdF told the Financial Times that Gazprom's agreement with an Algerian state-controlled gas group earlier this month would have "heavy consequences" for European energy customers.

Their warning about the growing threat of Gazprom seems designed to win over any members of France's ruling UMP party who may still be wavering over supporting the €72bn ($91.7bn) merger in a special parliamentary session starting next week. Thierry Breton, finance minister, has been talking up the dangers of an "energy war" since Gazprom announced its commercial alliance with Algeria's Sonatrach on August 7.

Concern has grown about Russia's use of gas as a political tool through state-owned Gazprom. This now seems to have replaced France's initial political justification for the GdF/Suez deal: to block a potential takeover of Suez by Italy's Enel, which has faded recently. The two French bosses said they were more confident since the summer that the deal would win both the necessary approval of the French parliament and get a green light from the European Commission with only relatively minor disposals.

Mr Cirelli said GdF was prepared to sell its 25 per cent in SPE, the Belgian electricity generator. Mr Mestrallet said Suez would resist selling its Distrigas distribution unit in France, its Fluxys pipeline company in Belgium, or its Elyo heating and cooling business in France. The Suez boss said he would replace any assets disposed of with acquisitions elsewhere in Europe. He is thought to be eyeing Spain and eastern Europe.

Asked about the agreement by Gazprom and Sonatrach to work together inliquefied natural gas and consider joint bids for foreign assets, Mr Mestrallet said: "This deal between [these] two historic suppliers of GdF and Suez could have heavy consequences for European customers." He added: "In the near term, it shows that we, as clients, were right to bulk up. In this industry, the bigger you are the better you can negotiate."

Mr Cirelli said Gazprom would soon sell gas directly to European customers. But he sought to dispel rumors that Gazprom might bid for GdF. "I know Alexei Miller, the chairman of Gazprom, and he has assured me that he has no intention of buying GdF or GdF combined with Suez."

He said GdF and Gazprom would announce "very quickly" a new gas contract to replace the current one, which expires in 2012 and accounts for 22 per cent of the French group's supply.
The Suez and GdF bosses hinted they might sweeten the deal for Suez shareholders, who are growing dissatisfied with the terms: a one-for-one share swap and a special €1 dividend.

Copyright The Financial Times Ltd.