Putin's Energy

Gazprom Exits VNG Amid Political Tensions

Gazprom Putin Miller AFP_effect
President Vladimir Putin and Gazprom CEO Alexei Miller had a sit-down on April 8.
  • Why it matters

    Why it matters

    • The move by Russian natural-gas giant Gazprom involving German gas provider VNG marks further deterioration of links between the countries, which used to be strong trading partners.
  • Facts


    • The strategies of government-owned Gazprom are closely linked to President Vladimir Putin’s policies.
    • Relations between Europe and Russia have chilled since sanctions were imposed on Moscow over the Ukraine crisis.
    • Gazprom’s move has ramifications for German companies as well as VNG’s stakeholders.
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The Russian natural-gas giant Gazprom has announced it intends to end its participation in eastern Germany-based gas provider VNG.

Gazprom officially said its exit is down to the fact that it has no possibility of influencing the management of VNG. Gazprom and VNG subsidiary Wintershall held a joint stake of 26.31 percent in VNG, but Wintershall sold its stake last year.

With a little more than 10 percent of shares, the Russian firm doesn’t possess a blocking minority.

Gas provider EWE in northern Germany holds about 64 percent of shares in VNG, while public utilities and municipalities in eastern Germany control more than 25 percent.

Gazprom’s decision has a fundamentally political motivation. The strategy of the gas giant, in which the Russian state holds a majority, is tightly linked to the policies of Russian President Vladimir Putin. The climate between the European Union and Russia has chilled considerably ever since Brussels imposed sanctions on Moscow because of the Ukraine crisis.

If and when the political climate calms down, the company could once again strengthen its commercial ties to German partners.

The planned exit from VHG is one of the steps designed to reduce Gazprom’s involvement in western Europe. Last year, the company canceled the South Stream pipeline project with the German chemical company BASF and its subsidiary Wintershall. 

Then Gazprom and BASF stopped a planned exchange transaction in which Wintershall would have transferred their jointly operated business in trading and storing natural gas to Gazprom. In return, the two companies were planning a project to open up gas reserves in western Siberia.

In this context, Gazprom’s planned exit from VNG makes sense from a Russian perspective. But the move will unsettle the ownership structure of the eastern German gas provider. The relative strengths of the shareholders have been distorted since last year, when Wintershall sold its stake in VNG to EWE, which gave the Oldenburg-based EWE ownership of about 64 percent of shares.

A shift is also ongoing with the second most important stakeholder, namely the eastern German municipalities. Cities such as Erfurt have already sold their shares. Leipzig, on the other hand, wants to increase its holdings in order to guarantee the provision of jobs at VNG, an important employer and taxpayer. The main stakeholder EWE is negotiating with all shareholders, and the outcome is unknown – this includes the options of retaining, extending or selling its share.

Despite its gradual retreat from involvement in western Europe, Gazprom retains options for the future. If and when the political climate calms down, the company could once again strengthen its commercial ties to German partners.

Gazprom would not have to start from scratch in its public-relations work. The Russian energy company will continue to be a sponsor of German soccer team Schalke 04 until 2017.


To contact the author: weishaupt@handelsblatt.com

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