Tuesday, July 14, 2009

Emfesz and the Spider's web

To update you on the situation of Emfesz (the Hungarian gas provider and frequently remarked upon company) and the murky world of its operations in Hungary, I would suggest you check out this post on the Jamestown Foundation's website. The deal involves a $1.00 transfer of the company in Switzerland, $1 billion fraud and notably famous Russians like Alexander Medvedev and the Kremlin PR machine. While the story itself is noteworthy of underworld business dealings, and whether correct or not I don't know, but the results appear to be that Gazprom now holds a 20% share in the retail gas market in Hungary.

This later point is particularly important and needs a few remarks. If we go on the assumption that at least some parts of this story are true, then that would mean that at least people in Russia know where Hungary is and that very important people in Russia are interested in Hungary. Ok, a basic premises, but something that is important to establish before going foreword. My second point is that this lends credibility to the idea that there is a concerted effort by the Russian government and Russian companies to involve themselves in the downstream business affairs of the Hungarian retail market.

And why is this important to establish and hasn't it been obvious in the past? You may remark. The point is that while Russia and Russian associates bumble around and leave bread crumb trails to track their moves, if a concerted strategy can be detected from multiple events then we can begin to talk of a concerted Russian strategy to control downstream retail assets of energy companies.

The detection of a concerted Russian state and private strategy is important because then we are not relying solely on rumors of who owns Surgutneft (SNG's attempt to take over MOL) for example. Therefore if Gazprom, or some company closely associated with it, owns Emfesz now with 20% of the Hungarian gas market, then dramatic inroads have been in Hungary's newly opened competitive gas market. And competitive it may be, Gazprom's entrance into the UK market resulted in competition occurring and customers switching. We'll have to wait to see what the prices will be on offer. This should be shown in the near furture. In the more distant future is the ownership stakes Russian oil and gas companies will have in Hungary and whether they are taken over through similar tactics.