Cablegate: Russian Interest in Investments in Germany
VZCZCXRO0276
RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHDF #0049/01 3541711
ZNR UUUUU ZZH
R 201711Z DEC 06
FM AMCONSUL DUSSELDORF
TO RUEHC/SECSTATE WASHDC 0050
INFO RUCNFRG/FRG COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHDF/AMCONSUL DUSSELDORF 0062
UNCLAS SECTION 01 OF 03 DUSSELDORF 000049
SIPDIS
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: ECON EINV ENRG PGOV RS GM
SUBJECT: RUSSIAN INTEREST IN INVESTMENTS IN GERMANY
REF: MUNICH 767
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Sensitive but Unclassified - Contains Proprietary Information.
Not for Internet Distribution
1. (SBU) Summary: Russian interest in buying into
German/European companies, including Deutsche Telekom and energy
companies has been a front page story. At the moment, in North
Rhine-Westphalia (NRW) and other parts of Germany, the level of
actual transactions has not come close to equaling the level of
press coverage. Still, there are signs of strong Russian
business/economic interest in NRW and other parts of Germany.
Gazprom and the German energy giant E.ON Ruhrgas are sponsoring
high visibility sporting and cultural events as part of a PR
strategy to generate goodwill. Russia recently appointed
Ruhrgas CEO Dr. Burghard Bergmann as Russian Honorary Consul in
Duesseldorf, following similar moves involving prominent German
businessmen in Stuttgart and Nuremberg. For now, the German
business community seems more interested in selling to and
investing in Russia than allowing Russian firms to gain a
foothold in Germany, but there is still a sense here that
Russian funds looking for known, safe, and profitable places to
be invested, may flow west to Germany. End Summary.
Sistema Eyes Deutsche Telekom
---------------------------------
2. (U) In late November, Sistema chief (and 62 percent
shareholder) Valdimir Yevtushenkov confirmed his company's
interest in buying a quarter of Deustche Telekom, as well as
that Russian President Putin had raised the issue with
Chancellor Merkel during his visit to Germany. Yevtushenkov
told Germany's "Der Spiegel" he plans to incorporate Sistema's
mobile phone subsidiary MTS, Eastern Europe's largest mobile
phone company, into DT, in exchange for 25 percent plus 1 share
of DT shares. Such a deal would make Sistema the second largest
DT shareholder and give them a blocking minority. The German
government, which through parastatal KfW Bank directly or
indirectly controls more than 30 percent of DT shares, would
remain the biggest shareholder. The second largest shareholder
currently is U.S. private equity firm Blackstone, which acquired
4.5 percent of DT shares in spring 2006.
3. (U) The Russian approach generated a major controversy and
subsequently has seemed to be put on ice. An unnamed member of
the DT Supervisory Board called the approach an
"industrial-imperialist attack by a Russian clique motivated by
power politics" and DT quickly formulated a defense strategy
against Sistema's bid. Yevtushenkov told the German press
Sistema would not force the issue and would not move against the
wishes of the German government. He also denied that Sistema
already owned DT shares. An Embassy contact with connections to
DT, however, told us that Sistema recently commissioned a German
bank to buy up DT shares silently. The Finance Ministry's
spokesperson, however, has stated Sistema's interest in DT is
not an issue for the German federal government.
Speculation on Gazprom's Interest in RWE
--------------------------------------------
4. (SBU) Germany's second largest energy company, RWE, based in
Essen, may also be of interest to Russian industry, but again
the issue seems to have been exaggerated in the German press.
Gazprom, which supplies approximately 34 percent of Germany's
natural gas needs, was reported in November to be interested in
buying RWE shares owned by the City of Duesseldorf after Lord
Mayor Joachim Erwin (CDU) reportedly expressed interest in
selling them to eliminate his municipal debt. A senior official
in the Mayor's office, however, told us the media had
over-interpreted an off-hand remark by Erwin over how he wanted
to make the city debt-free by 2007. Duesseldorf holds about one
percent of RWE shares. The NRW cities of Essen, Dortmund and
Cologne have larger shares, but made clear after this stir that
they would not sell their stakes in RWE.
5. (U) In late November, Gazprom Germany chief Hans-Joachim
Gornig told the Berlin daily "Tagesspiegel" that his company's
interest in investing in Germany was "very limited at the
present time," citing strong regulation of the German energy
market. He also denied any exploratory talks regarding RWE, let
alone negotiations on buying shares. He conceded, however, that
Gazprom continues to engage in exploratory talks with German
firms.
Gazprom Tries to Move into German End-User Market
--------------------------------------------- -----------
6. (U) Earlier this year, Gazprom unsuccessfully tried to swap
exploration rights in its Yuzhnoi-Russkoi field for a stake in
Ruhrgas' German operations. This move was rebuffed by Ruhrgas'
parent, the Duesseldorf-based energy giant E.ON. Following this
DUSSELDORF 00000049 002.2 OF 003
move, speculation persists that Gazprom seeks to secure a stake
in the German energy market via RAG, the Essen-based
conglomerate with a large energy component, once it goes public
in 2007. To underline its commitment to the region, Gazprom
signed an agreement this fall with one of the most prominent
soccer clubs in Germany, Schalke 04 from Gelsenkirchen/NRW,
making Gazprom their main sponsor for the coming years. A
Schalke executive recently told the CG that Gazprom has
committed to pay up to 125 million euros to the team, depending
on how well it fares during coming seasons. Given
Gelsenkirchen's depressed economy, Gazprom's gesture has earned
the firm considerable good will in this enthusiastic soccer
region.
Ruhrgas CEO Appointed Russian Honorary Consul
--------------------------------------------- -------
7. (U) In late November, Russia announced the appointment of
its new Honorary Consul in Duesseldorf, Dr. Burkhard Bergmann,
CEO of Ruhrgas. Bergmann is also Deputy Chair of German
industry's East Committee (Ostausschuss) and is the first and
only non-Russian on the Gazprom Board in Moscow. He becomes the
third prominent German businessman to receive such an
appointment, after Klaus Mangold (ex-DaimlerChrysler Services
CEO) was named Russian Honorary Consul for Baden-Wuertemberg and
Nikolaus Wilhelm Knauf in Nuremberg for parts of Bavaria.
8. (SBU) At the high-profile presentation in Duesseldorf,
featuring speeches by Minister President Ruettgers and the
Russian Ambassador, Bergmann forecast a major role for Russians
to play in NRW. There are 411,000 Russian citizens and 130
firms from Russia in the state. He highlighted Ruhrgas' past
sponsorship of major Russian-German cultural projects, such as
the financing of the recreation of the legendary Amber Room
(Bernsteinzimmer). He also spoke about E.ON Ruhrgas plans to
bring more pieces of art from major Russian art museums (e.g.,
Tretyakov and Pushkin) to NRW in 2007 as part of the firm's
broader PR strategy. Minister President Ruettgers in his
presentation listed a number of statistics attesting to the
growth in ties between NRW and Russia: trade flows increased by
20 percent in 2005 and doubled in the 2003-2005 period. Three
hundred firms from NRW have offices or operations in Russia.
There are 55,000 Russian Jewish imigris in the state as well as
some 800,000 Germans of Russian origin (Spaetaussiedler). The
state has 20 sister-city relationships and 80 school
partnerships. There are 700,000 native Russian speakers in NRW.
Russian Ambassador Vladimir Kotenev added that 1/6 of trade
between Russia and Germany is with NRW, and stated there are
four partner region relationships between NRW and Russia.
Russian Interest in Southern Germany
--------------------------------------
9. (U) Russian President Putin visited Munich October 11 after
meeting the Chancellor in Dresden. Hundreds of businessmen were
invited to a dinner with Putin hosted by the Munich Chamber of
Commerce. In his dinner speech, Putin stressed the time is
right for Russian investment in Germany and the rest of Europe
-- nobody should be afraid of Russian dominance or German
dependence on Russian oil and gas. Putin said he did not
understand German nervousness, as Russian partners are no less
capitalist than their Western counterparts. A State Chancery
contact told CG Munich that while Stoiber desires to strengthen
Russian-Bavarian relations and create a free trade zone between
the EU and Russia, he still considers a stronger transatlantic
partnership to be the priority.
Russians Look to Expand Presence/Economic Ties in Frankfurt
--------------------------------------------- -------------------
10. (U) Russia has also been looking to expand its
diplomatic/economic footprint in the Frankfurt area for a number
of years and the November 22 symbolic dedication of the Russian
Consulate General in Frankfurt has moved them a step closer.
There has been much media attention and speculation surrounding
establishment of a Russian Consulate General in Frankfurt over
the past couple of years, but few concrete details. Earlier
reports suggest that it will be a major operation (3,000 square
meters) with over 200 employees. It remains unclear as to when
the Consulate will officially open--Russian officials have been
tight-lipped regarding the specifics. Given recent reports that
nearby Wiesbaden may host the November 2007 visit by Russian
President Putin, there is a sense that the Consulate may open
soon.
11. (SBU) Comment: Increased Russian interest in Germany, at
the both the economic and cultural level, reflects historical
ties as well as current economic realities. Russian energy
companies are awash in petrodollars that need to be invested
somewhere. Russia's historic ties with Germany, as well as the
DUSSELDORF 00000049 003.2 OF 003
strength and transparency of its economy, makes it a natural
choice for Russian business. Germans are still quite hesitant
to give Russian companies a voice in major concerns, especially
assets, such as energy companies, that have national security
ramifications. Chamber of Commerce officials and businessmen in
NRW who deal with Russia frequently stress the difficulties they
face while there, but add they expect economic and commercial
ties to continue to grow and will prosper. Until now, German
interest has been more to sell their products in Russia and to
invest there to serve that market, rather than to encourage
Russian firms to invest in Germany. End Comment.
12. (U) This cable has been coordinated with Embassy Berlin,
with input from Consulates General Frankfurt, Munich, Hamburg
and Leipzig.
BOYSE