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Financial Times: Putin makes Shell’s ‘big ears’ flap

By Paul Betts
Published: September 21 2006

A few years ago, Jeroen van der Veer admitted to Stanford MBA students he had “very big ears”. This has proved a useful asset for Shell’s self-effacing boss. After all, he explained, the rule of the game in running a multinational business was quite simple – “politicians speak, entrepreneurs listen”.

His ears are likely to be flapping more than usual on Friday. Vladimir Putin is coming to Paris for talks with Jacques Chirac, French president, and Angela Merkel, Germany’s chancellor. The issue of Russia’s strong-arm energy tactics and its decision to block the massive Shell-led Sakhalin 2 project are expected to feature prominently.

The French and German leaders are bound to echo the general discomposure provoked by the Kremlin’s latest move to assert control over the energy sector. Unfortunately, they are likely to extract few concessions from Mr Putin.

Indeed, the Russian president is likely to present President Chirac and Ms Merkel with his own shopping list. Not only to try securing greater direct access for his Gazprom state monopoly in other parts of Europe, but also gain a say in running EADS. A Russian state bank has already amassed a 5 per cent stake in the European aerospace group. Moscow has signalled it wants to increase it further and seek a seat on the board. The company’s Franco-German management team has bluntly rejected the Russian advances, so have government ministers.

This should not prevent Mr Putin from increasing the pressure. Aeroflot, the Russian flag carrier, was already waving a carrot and stick yesterday – it was going ahead with a big order for Boeing aircraft, but was considering buying the Airbus A350, too.

The problem is that as long as oil prices remain high, Mr Putin can continue to be assertive in his dealings with other European countries dependent on Russia’s energy resources. He is also in a far stronger political position at home than his French, German, British and Italian counterparts. And with the European Commission and its members still trying to put together the semblance of a credible energy policy, Mr Putin can keep his rivals in an arm-lock.

This is not what Mr van der Veer or his colleagues at Total, BP and Exxon probably want to hear. But they can take some comfort that their Russian woes are helping to keep oil prices high and, in consequence, supporting share prices.

Copyright The Financial Times Limited 2006

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