Eni and Gazprom

I'm a little late with this I fear, but an article in last Friday's FT caught my attention:

Eni, the Italian energy company, and Russia’s Gazprom on Tuesday finally signed a wide-ranging strategy pact to replace a gas distribution deal that collapsed last year.

The deal, which confirms Eni as Gazprom’s single largest customer, comes amid intensified concern about Gazprom’s ability to produce enough gas for domestic and export markets.

A leaked report by ­Russia’s Ministry of Trade and Economic Development predicts the country will not have enough gas from next year to satisfy domestic demand and to cover all its export contracts to Europe. European Union officials say this explains why some European countries have been trying to negotiate bilateral deals directly with Gazprom.

Under the terms of the deal signed on Tuesday, Gazprom will gain direct access to the Italian gas market. It will be able to sell up to 3bn cu m of gas in Italy a year from 2010, equivalent to about 3 per cent of the market and worth about €600m-€750m ($770m-$963m) a year.

The deal helps Eni respond to pressure from its home regulators to reduce its market share in Italy.

In return, Eni will gain access to a number of upstream oil and gas projects with Gazprom. The two companies said they would work together on a series of projects that would be finalised by the end of next year.

Gazprom has long been targeting access to the European retail markets. It already owns 50 per cent of Wingas, a German distribution company, and has tried to strike similar deals with other European countries.

However, EU officials have warned that bilateral deals with Gazprom undermine Brussels’ efforts to work out a common policy towards Russia and its gas supplies. The EU has been pushing Russia to ratify an energy charter treaty that would provide access to Russia’s reserves and remove Gazprom’s monopoly of the export pipeline to Europe.

Now there are so many things on which I am not an expert that it hardly needs saying that I am not an energy sector one. But this type of agreement worries me. Especially when I read things like this:

“The agreement signed today is a major step towards the security of energy supply to our country,” said Paolo Scaroni, Eni chief executive.

I would be very careful about making any assertion that agreements with Russia about long term energy needs constitute a move towards greater security if I were you M. Scaroni. One of the reasons I would be worried is that Russia is far from being a democracy, and is facing an impending demographic melt-down. If you are not aware of the looming issue in the Russian Federation in this regard, then I suggest you dig into some of the posts you will find on this page.

Now at this point no-one really knows how societies as socio-political entities will respond to population meltdown, since we have never been here before, but I think we should all be aware that this is unlikely to be a factor generating more stability. For this reason alone I think it is very important we all try to formulate and abide by a common EU policy. Frankly I fully anticipate 'agro' with Russia over the Baltic states, especially since out-migration by ethnic Latvian, Lithuanian and Estonian populations is leading to a steady increase in the Russian speaking population there, and this is all grist to the mill for aggressive Russian nationalism. An indication of what this might mean can be seen in what is currently happening in Georgia. So I wouldn't want to see Italian pensioners being frozen and held to ransom in midwinter in an attempt to get concessions from the EU over Russian interests in the Baltics.

Does all this seem very far fetched to you, well then try looking at this piece about Serbia, and start thinking about what exactly might happen in those East European societies who seem likely to remain outside the warm hearth of the EU for many years to come:


Serbia - Outbursts of nationalism are nothing new in Serbia, but the blustering graffiti in a Belgrade park belongs to a bygone era. "On your knees before Serbs!" it demands.

In June, Serbia lost access to the sparkling Adriatic coastline when its sister republic, Montenegro, gained statehood. This winter, it could lose the southern province of
Kosovo if U.N.-brokered talks lead to independence as expected.

As their nation relentlessly shrinks, Serbs — a fiercely proud people accustomed to ruling the roost in the Balkans — are slipping into despair.

"How do you like our cemetery?" businessman Zoran Djuric asks cynically, standing on a hill and sweeping his hand over the twinkling lights of the capital below.

A string of staggering setbacks began last spring, when the
European Union suspended pre-membership talks with the former Yugoslav republic for failing to arrest Gen. Ratko Mladic, the world's No. 1 war crimes fugitive long believed to be hiding here.

Of course the key point here is almost missed in the rush, the principal cause of Serbia's population shrinkage is the very low birth rate (data on Serbia itself is hard to come by, but the birth rate fell rapidly in the 1990s and seems to be currently somewhere in 1.5tfr region according to Serbian demographer Mirjana Rasevic - and the out-migration of young Serbians of childbearing age to within the walled garden of the EU were wages are higher and employment prospects greater.