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If Putin Sakhalin2 blackmail tactics were applied in Groningen Gas debacle negotiations

Below is an English translation of a Dutch article published by the NRC last night. It suggests that Shell and Exxon are getting away with very good terms in regards to the financial fallout from the Groningen earthquake damage debacle. Basically Shell and Exxon are cleverer than the negotiators of the Dutch government. The article author Menno Tamminga makes the comparison ‘how would Putin have handled this’? With referral to Putin blackmail tactics used against Shell in the Sakhalin2 debacle.

During a documentary film segment, *Oleg Mitvol, the Russian Environmental Minister in 2006, confirmed what he has said before on the subject  of Sakhalin II i.e. that he obtained the leaked insider evidence from John Donovan that cost Shell its majority stake in the project (and many billions of dollars).

How did Putin close that gas agreement?

Wiebes and the cabinet are still the prisoner of agreements from 1963, when the Groningen gas started to flow. The last phase of gas extraction could have been the moment for a Putinic putsch.

Has nobody called Vladimir Putin? You can tell the Russian president what you want, but experience in negotiations with energy concerns – that’s what he has. He would have, if he had wanted it and if the cabinet had polled him (small chance, MH17) some tips on how you as a power of arms negotiate with Shell and ExxonMobil on the distribution of the costs and revenues of the Groningen gas.

But unfortunately. I do not see Putin’s hand anywhere. The outcome is a win-win for the oil giants. The national government pays a larger share of the costs and is satisfied with less income. This costs the treasury 1.65 billion euros in natural gas revenues up to and including 2022, Minister Wopke Hoekstra (Finance, CDA) wrote last week to the House of Representatives. Furthermore, the oil companies and the government put every 500 million euros in the economy of Groningen. But partly thanks to the new agreements, the oil companies actually pay only 135 million euros and the government 865 million.

Conclusion: Eric Wiebes, Minister of Economic Affairs and Climate (VVD), is an expensive negotiator.

How did Putin deal with this? In 2006 he got Shell with a lot of aplomb and under threat of the Russian state power the majority of the shares in Sakhalin II, a rich oil and gas field. Putin screened with 50 billion dollar claims for damages due to environmental violations. Russia paid for the share package that Shell and its Japanese partner gave. But that was more a contribution to costs incurred earlier than the value of future profits. Not that I want Mr Wiebes to recommend blackmail practices, but …

Also read this background story about Shell, NAM and Groningen: A line under the host era Wiebes and the cabinet are still the prisoner of agreements from 1963, when the gas started to flow. The national government, Shell and ExxonMobil can do nothing without each other. The NAM, the Dutch petroleum company, is their ‘tool’. The NAM has the knowledge and wins the gas. Shell and ExxonMobil are the owners of the NAM and wind up the profit with dividend. The government owns the gas and collects gas proceeds for the benefit of the treasury.

The final phase of gas production has now begun. That was the moment for a Putinous putsch. If the NAM claims more income, I can agree on one condition, Wiebes should have told the oil companies. You more money? Then I want more NAM. There will be a new NAM and the government will become a third owner. The new NAM takes over all the assets of the existing NAM, with the exception of the claims for damages. You promised to pay that, Wiebes should have said, so go ahead.

Do you still think of claims for damages because NAM has to stop gas production? Keep dreaming. The termination is normally a business risk. Everyone knew that gas extraction is finite, well: the end comes a little earlier. You did not think that your private interest was beyond the public interest of security in Groningen?

Oh, something else. Just like us, you put 500 million euros into Groningen’s economy via NAM. And 500 is 500 hè. These are not deductible costs or something. So not: say 500 million and do 135 million. That would be ridiculous.

And besides, you never guess who I had on the phone last week … Vladimir Putin. Yes, the man of Sakhalin II. He had a few sharp tips for me today. Man, man, what a guy. But yes, this is the Netherlands, not Russia. And I am not a Putin, but just Eric Wiebes. Just be happy with it. And like to draw there. At the cross.

Menno Tamminga writes about entrepreneurial policy and economy every Tuesday.

This website and sisters royaldutchshellgroup.com, shellnazihistory.com, royaldutchshell.website, johndonovan.website, and shellnews.net, are owned by John Donovan. There is also a Wikipedia segment.

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