Gazprom lurks behind sale of Hungarian gas distributor

DPA ^ | May 7, 2009

[Tailgunner Joe]

Budapest - Hungary's largest gas distribution company Emfesz has been sold to Swiss-based firm RosGas AG, Emfesz spokesman Igor Gallyas said Thursday, confirming a report in the Russian newspaper Vedomosti.

The news has prompted speculation that the Russian energy giant Gazprom, which is believed to be behind RosGas, is looking to strengthen its hold over the Hungarian, and by extension, the EU market.

Gallyas, speaking to the Hungarian news agency MTI, neither confirmed nor denied the report by Vedomosti that RosGas is part of Gazprom's family of subsidiaries.

However, in a statement posted on its website on April 28, Emfesz said that RosGas is indeed part of Gazprom's network of business interests.

This claim was dismissed at the time by Gazprom press secretary Sergei Kupriyanov.

'RosGas has nothing to do with Gazprom and does not belong to the Gazprom group,' Kupriyanov said.

Emfesz is the largest player on Hungary's deregulated gas market, handling around a quarter of all imports.

It was, until now, indirectly owned by the Ukrainian oligarch Dmitry Firtash through a Cyprus-based holding company called Mabofi.

Mabofi issued a statement on Thursday claiming that the sale of Emfesz had been conducted without the knowledge or assent of the directors or the owner.

In the statement, Mabofi director David Brown said the firm intends to fight to retain ownership of Emfesz through the Swiss, Hungarian and Cypriate courts.

'Mabofi discovered on the morning of the 6th May 2009, that the shares in Emfesz had been fraudulently transferred to a Swiss company registered in Zug, Switzerland, RosGas AG,' the statement ran.

The whole transaction appears to be part of a tangled web of conflicting interests and complicated ownership structures.

According to Mabofi, one of the directors of RosGas is a Hungarian lawyer who also works for Emfesz. Mabofi claimed this lawyer assisted the managing director of Emfesz, Istvan Goczi, in arranging the sale of the firm.

Among Dmitry Firtash's other business interests is a 45-per-cent stake in RosUkrEnergo, another Swiss-registered, firm that until January had a stranglehold on the transit of Russian gas through Ukraine to Europe. Gazprom owns 50 per cent of this company.

The Russian energy giant stopped supplying RosUkrEnergo with gas during the crisis in January when a dispute over pricing between Ukraine and Russia led to shortages across Central Europe.

After the crisis in January, the Ukrainian authorities denied RosUkrEnergo access to 11 billion cubic metres of gas stored in Ukraine that the firm maintains it owns.

Emfesz announced at the end of April that it would temporarily stop importing gas from Ukraine as it switched suppliers, from RosUkrEnergo to the hitherto obscure RosGas.

[Tailgunner Joe]

Gazprom's Murky Games in Hungary - Hungary has been a key target for the Russian state-owned Gazprom since the collapse of communism within Central Europe. Viewed as a potential major European gas hub, Hungary first became a target of the Kremlin in 2002 when the mysterious gas trading company, Eural Trans Gas (ETG) was registered in Budapest. That year ETG took over the contract from a Russian company, Itera, acting as the intermediary for supplying gas from Turkmenistan to Ukraine. ETG was a totally opaque structure which was later exposed as belonging to Ukrainian gas trader Dmytro Firtash and his partner, Ivan Fursyn, a banker from Odessa with close ties to the administration of then-Ukrainian president Leonid Kuchma. ETG was paid for its services with 13 billion cubic meters of gas by the Ukrainian side which it then sold on the European market for a considerable profit. Soon after it began trading, the company's owners were suspected of having connections to the Russian mafia. This was denied by the then-unknown owners of ETG, who instituted a number of libel suits against anyone alleging the company had mafia links. The Kremlin became nervous and closed down ETG in July 2004, replacing it with a new intermediary company, RosUkrEnergo (RUE). The 50 percent owners of RUE were the same individuals that had established ETG, Dmytro Firtash and Ivan Fursin, while the remainder of RUE was owned by Gazprombank -which at the time a fully owned subsidiary of Gazprom. The Kremlin, for undisclosed reasons, claimed that it did not know the identity of Gazprombank's Ukrainian partners in RUE.

[MSF BU]

It will be fun to see the kind of havoc that the new shale fracture technology will give to the gas markets and Russian gas sales especially.