How the Austrian energy company became “Gazprom W…

A terrible end is better than endless dread: this proverb sums up the opinion of an Austrian expert who has long headed Austria’s energy control authority, Walter Botz, and calls for a swift embargo on Russian gas.

Nothing could be worse, he explains in the Viennese weekly Falter (No. 17, dated April 22, 2022), than the current indecision, which will keep prices high and therefore could indefinitely prolong the war in Ukraine. Each threat of an embargo that does not take effect exacerbates the situation. Or else we would have to announce: boycott only from August, which would bring prices down and allow the filling of reservations in anticipation of winter. According to him, it is mainly the “fear” factor that explains the rise in prices.

In any case, the only way out will be through European solidarity, thanks to the combination of alternative sources of supply and energy savings, prolonging the useful life of nuclear or coal plants and returning to producing goods that were purchased elsewhere, such as fertilizers or aluminum. It will be difficult, but we will survive, says Botz, who echoes German Chancellor Angela Merkel’s famous quote when she decided in 2015 to take in refugees fleeing the war in Syria and Afghanistan: “Wir schaffen das” ‘(“We’ll get there”).

This is the opinion of a man very involved in the structures of the European Union – as director of the Austrian energy agency E-Control, he was a member of the European Council of Energy Regulators, created in 2000 and based in Brussels. It weighs even more at a time when Germany is hesitant to take drastic measures on gas. But it has already made great efforts: from 55% before the conflict, its dependency rate has dropped to 35%.

If Europe finds itself next winter with 15% less gas, after exhausting all possibilities outside Russia, but this shortage is evenly distributed, says the Austrian expert, “Nobody can tell me that the entire European economy is going to collapse.”

The logic of the market economy

Austria gets 80% of its gas from Russia. But gas accounts for 22.4% of its energy matrix. How did we arrive at this number, which makes the country vulnerable today? The center-left Viennese daily Der Standard detailed in a meticulous investigation on Saturday 30 April how Vienna fell into the trap.

The decisive factor was less the action of the pro-Russian lobby or the involvement of business circles – in particular the main actors of the Austrian economy in the empire of the oligarch Oleg Deripaska – than the characteristic logic of a market economy. Gone are the days when the oil and gas company ÖMV, now OMV, was a legacy of the Soviet occupation troops! From the moment it became, in 2005, a fully privatized company with more than 50% of the shares outstanding on the stock exchange (the Austrian State held 31.5%, the other major shareholder being Abu Dhabi), it mainly sought to acquire gas at the best price.

“Russiansrecalls specialist Walter Botz, have very low production costs and have always insisted on being a little cheaper than their competitors”. Industrialists and simple consumers were happy, that’s what counted in the eyes of the government. People were more suspicious of the supposedly obsolete Ukrainian gas pipelines than of Gazprom, which has always been very reliable and with which Austria has been linked for a long time. As for an armed conflict in Europe, it was unthinkable.

Result: while in January 2009, during the first conflict between Moscow and Kiev over gas, Austria had a very diversified supply, 50% covered by Russia, but also by Norway and other partners, it locked itself for a decade in a relationship exclusively with Gazprom. In part because other options have closed. In 2010, Putin scolded Social Democrat Chancellor Werner Faymann as a boy, Austria having shown leanings of independence by engaging in the European Nabucco project, a gas pipeline linked to (already abandoned) Azerbaijan: “Nabucco is meaningless, it is dangerous” the Russian president got heated. Nabucco’s death, which could have been extended to Iran if geopolitical conditions had become more favourable, was in Moscow’s interest.

An energy policy without a geopolitical vision

Austria, which is pleased to be number one in the European Union in renewable energy (31.3%), pays for not really having an energy policy beyond the “green” aspects. This was primarily defined by the OMV. Apart from the Austrian consensus, which was very much anchored, in the prohibition of using nuclear energy as well as coal-fired power stations, the issue did not seem to be of the utmost importance. The proof that the energy portfolio was seen as insignificant is that it was granted two years ago to Environment Minister Leonore Gewessler, of the Greens, at the end of negotiations that prepare the governing coalition between conservatives and ecologists. His fellow German ecologist Robert Habeck, Vice Chancellor and Minister of Economy and Climate, has a completely different scope.

Once the country’s energy line was fixed more or less on the upper floors of the OMV, it was enough for its former general director since 2015, the German Rainer Seele, to bet on the Russian card in the name of cheap gas to accelerate further the trend: before his departure in the summer of 2021, the contract with Gazprom was extended until 2040. This is how OMV attracted the nickname “Gazprom West”.

But the main responsibility lies with political leaders who have never tried to take charge, Botz points out. Particularly under the reign of the young Conservative Chancellor Sebastian Kurz, in this post until last fall. His successors are content, for now, to reassure consumers and provide €150 in aid to less affluent families.

Anyway, it’s a little late to meditate on another proverb: you shouldn’t put all your eggs in one basket.

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