Alistair E Scott is a Director of Sinergy Global Pty Ltd; a Trading Company registered in South Africa for various trading operations mainly in the areas of Oil and Gas and Precious metals and stones. The company has associate offices in the Bahamas, Monaco and the PRC.
“FROM RUSSIA WITH LOVE”
I would imagine that just about everyone who will read this article will have heard of the legendary spy for Her Majesty’s government, James Bond, 007. His famous exploits when pitted against the bad guys, portrayed by Russia of course, with that ruthless, cold demeanour and glamorous femme fatales, they were always up to no good, but the ‘good guys’ in the West would always overcome their ill intentioned adversaries. This, however, was a fairly typically held viewback in the 1960s by the majority of people in the West, but thankfully, times have changed, and today there is no Soviet threat, no USSR and no Berlin Wall, but have thosestereotyped perceptions of Russia really changed?
As a businessman working in global markets, I come into contact with fellow businessmen of all cultures, and no doubt political persuasions, but the thing we all have in common, is the desire to transact business with one another, regardless of what our personal political views might be. This, I believe, should be the cornerstone of international business dealings, but there is unfortunately a reality that exists, and that is the politicising of trade. There may of course be many reasons for this, some perfectly valid, but others undoubtedly in place in order to interfere with the economy of other nations, to disadvantage them to the benefit of their own economy. Such interference can take many forms however, but both sanctions and negative media speculation undoubtedly the most damaging.
Perhaps the best example we see today of this level of interference is the ongoing arguments over the Nordstream 2 project. A project which was founded on a purely commercial basis between Germany and Russia has become a political football, where geopolitics may very well affect the future of the pipeline. In my mind, there is no easy answer to the current dilemma for the Partners of Nordstream 2, as it is now at the centre of a political battle, and Russia once again is cast in the role of that 1960s spy novel bad guy intent on destroying its good guy enemies by holding them to ransom with some fiendish plan. That plan, it would appear, is Nordstream 2!
Germany’s reliance on gas continues to rise, and it made commercial sense to construct a direct pipeline from Russia to Germany in order to service that growing requirement. This would prove more economically viable than, for instance, theUnited States whose companies are selling gas obtained through the much maligned fracking process to European countries, however, the US gas is more expensive.Washington, however, insists that Europe finds an alternative source for its gas than Russia. There are, as we know, other countries who have concerns over Nordstream 2 as currently without the pipeline, they are making money from transit fees. Yes, there is a commercial argument there, but these have been overturned and replaced by political arguments. The politicising of trade for thinly veiled political gain is not be acceptable nor should it be, and the politicising of the Nordstream 2 project is precisely that.
Germany saw an opportunity to get much needed supplies of gas from Russia in the most economic and effective way, which was the obvious motivation behind the joint venture development of Nordstream 2. These are how commercial decisions are made. When making a decision from where to source your gas supply, for instance, for China, the most effective of these is from Russia. I used that as my example because it is a supply route my Company is directly involved with and I shall return to this later.
Germany’s considerations were therefore purely commercial, yet the political furore which has resulted is undoubtedly politically motivated. Gazprom, the Russian state owned energy company is seen as the real potential villain of the peace in this affair. Germany is under immense pressure from the EU and her US ally to ensure that Nordstream 2 does not pump one cubic meter of gas, scuppernong what is not just a wonderful engineering achievement, but a great boon for the economies of both Russia and Germany, and that is where the problem lies. The EU want a more diversified supply of gas, yet European fields are depleting, a factor in Germany’s decision, no doubt, and the export of gas from Russia being important to the Russian economy.
The political detractors state that Russia might decide to turn off the supply of gas, thus depriving Europe of much needed supply, or at least limiting the flow which will be reflected in the price of gas to the European market. Is this a justified concern? Obviously Germany had no such reservations when committing to the project as they regarded Nordstream 2 as an essential adjunct to the development of their economy, and not as a partner in the delivery of a weaponised Trojan Horse into Europe.
Nordstream 2 has become a major political target, being threatened at every turn with the threat of sanctions which are piled on Russia seemingly almost daily for every political ill that befalls all else, including the attempted poisoning of Navalny by the Russian State!! I always felt it strange that Russia could develop an engineering feat in the form of Nordstream 2, yet bungle an attempt at the ‘poisoning’ of Navalny with such a deadly concoction as Novichok?!?!Perhaps everything is not what is seems, or more relevantly, what is reported.
Being a State owned entity, Gazprom of course is under the ultimate control of the government. This makes it an easy target for dissenters. This gives those political dissenters the ammunition they need to weaponise Nordstream 2. If it is owned by the Russian State, it must be politically motivated in its commercial decision making? This is not a really a conclusion one should come to. Gazprom is one of the worlds leading energy companies, active on a global scale, and if it was primarily a political tool of government, without proper commercial management in place, it could not compete with other multi nationals as indeed it does. That is the fact of the matter. Further, being a State owned entity, commercial decisions will be made that will advantage both the company and the Russian economy, as opposed to the faceless, statelessinstitutional investors of many of their business rivals, whose loyalties lie solely to the balance sheet.
In conclusion, we must accept that given key protagonists in the Nordstream 2 affair, namely the initiators of the projects, Germany and Russia, whose motivation was to create acommercial joint venture which would supply the former with an ever rising demand for gas. Gazprom, with its technical abilities, financial strength and an undoubted support from the Russian government was a marriage made in heaven.
On the flip side, the EC, the US and several other European countries saw Nordstream 2 as not so much a commercial venture, but a weapon to be used against them, a gun to their head which could be triggered at any time in order to hold Europe to ransom, despite a number of countries in Europe still supporting the project. The response being to sanctionRussia and the project at every opportunity, thus maintaining economic pressure on Russia and marginalising her even moreas far as conducting international trade is concerned.
Our company, Sinergy Global PTY Ltd (SGPL) as an energy supplier, naturally sees Russia as a major potential trading partner, especially with clients in the PCR seeking significant volumes of LNG. We have recently been seeking a supplier of LNG in Russia with a view to building up a substantial business partnership in order to satisfy the requirements of our client customers. Although in the total scheme of things, our requirement is dwarfed by the huge amounts in total of LNG Russia is and will continue to supply to China involving a number of lucrative contracts between the two countries, we are aiming to expand our business in the shorter term to a not insignificant $1bn a year. One might think that this is a level of business that an LNG supplier would welcome, let alonewhat is after all a welcome addition to the economy of any country. The reality here however is a very different story.
We so far have been unable to find a supplier, despite having been in contact with all of the major supplier is Russia. As a businessman, I have been nothing short of amazed at this development. Despite our company only recently having been established in order to meet the demands of our clientcustomers, we have a wealth of experience behind us operating in the energy sector. All of our finances are in placeto initiate ready top begin supply. Yet the silence from the majors is deafening.
There is, however, a multitude of individuals and companies who will tell you they have ‘mandates’ with the major suppliers, both corporate and refineries, who can provide what is needed. Of course, such claims are as nonsensical as they are fraudulent and time wasting. The majors have disclaimers on their websites advising the poor unsuspecting buyer to be aware of unscrupulous individuals using their company name, the names of employees and even fake websites in an effort to claw fees from you in a number of creative ways outlined on their fake procedures. In the last couple of weeks, we have already uncovered two scammers, introduced to us by reputable sources, but only uncovered after a deep Due Diligence. A third did not require such in depth investigation, as a gentleman with a typical Russian name and supporting photograph gave himself away with a Nigerian accent! It would be funny if this was not such an absurd situation.
We are eager to use Russian product which will put money into the coffers of both the supplying company and the Russian Treasury, but we are always met with the same response; we are asked to send in information to a generic email address, and if there is any interest, we will hear back. This is really a major negative in terms of trade relations surely?
Can this be the negative effect of government ownership? Does government really not care if $1 billion is lost to the treasury? Is it not in the economic interests of both the company and the government that trade be encouraged? Yes, there are many contracts put there between the government of Russia and China as we have already alluded to, but should legitimate, additional supplies not be made available toprivate enterprises who are able to meet import requirements? I say legitimate, in so far as they are requests from buyers who are not importing product that impinges on existingcontracts between governments, or companies. Why should this kind of business be discouraged, because as a trading company, it feels precisely that.
I have worked with, and continue to work with a number of Russian companies, including the Russian Direct Investment Fund, and am vocal in my support of investment in Russia. I am active in my attempts to direct investment into the Russian economy as I have faith in the future of the economy, and there are opportunities which are undoubtedly missed by Western investors as the stigma of the old Soviet days, to my surprise, still exists.
It is quite possible that should we not be able to set up a relationship with a Russian supplier, the buyers will go elsewhere as there are other players in the market who would happily supply us. But why should we be put in this position? I have even put this question to the Ministry of Energy and I have my ‘hearing’ in a couple of months!, but as a commercial entity, we are going to have to move somewhat quicker, however, this is a point that needs to be raised.
In closing, I fully understand the reasoning behind Russia’s need to protect her own natural resources, particularlyfollowing the Yukos affair where there was the real possibility that the country’s greatest asset was going to be carved up by its management and sold off to foreign entities. How could such a possibility ever be acceptable to a government? This affair precipitated the renationalisation of this priceless national asset, understood, however it does not explain as to why our company is having such a torrid time finding a Russian supplier to cooperate with us in providing LNG to our client customers in China.
*The comments in the above article are my own personal observations and do not necessarily reflect the policies of Sinergy Global PTY Ltd
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