RUSSIA tightened its energy embrace over Germany yesterday when it agreed an asset swap in which Gazprom gave up a quarter of a giant Siberian gasfield in exchange for half of a Hungarian gas company belonging to E.ON, the German utility.

Gazprom is ceding 25 per cent of Yuzhno Russkoye to E.ON, which owns Ruhrgas, the largest gas wholesaler in Germany. The Yuzhno Russkoye field has total reserves of 700 billion cubic metres and, after production starts next year, will have annual output of 25 billion cubic metres, roughly a quarter of Britain’s annual gas demand.

The deal with E.ON follows a similar transaction in April with BASF, the German chemical giant that has a joint venture pipeline business with Gazprom, Wingas.

BASF acquired 35 per cent of the economic interest of Yuzhno Russkoye and, in return, raised Gazprom’s stake in Wingas from 35 per cent to 50 per cent.

The E.ON deal is designed to satisfy Gazprom’s ambition to extend its influence downstream into Europe’s wholesale gas markets — an ambition that has encountered resistance from European governments.

E.ON is giving the Russian firm a half share minus one share in Foldgaz Storage and Foldgaz Trade, as well as a quarter share in E.ON Hungaria, the regional power and gas supplier.

E.ON will also make a balancing payment to Gazprom that has not yet been quantified and the two companies have agreed to work together on gas-fired power projects within Europe.

Wulf Bernotat, E.ON’s chief executive, said the deal would deepen the firm’s long-standing partnership with Gazprom. “Against the background of rising demand we are taking precautions to ensure that enough gas will be available in Europe in the future, too,” he said.

Between them, Ruhrgas and Wingas dominate the import and wholesale distribution of natural gas in Germany and the two companies have an intimate relationship with their major supplier, Gazprom.

In September last year, that relationship was strengthened when they agreed to each take a 24.5 per cent stake in North European Gas Pipeline, a mammoth project to build twin pipelines along the Baltic seabed from Vyborg in Russia to a landfall on the German coast.

Gazprom wants to get more of its gas into Western Europe where it fetches a higher price, but it sees its ambition frustrated by the need to use transit routes through troublesome neighbours, such as Poland Ukraine.

Gazprom suffered a huge embarrassment with Ukraine last winter when it attempted to shut off supplies to the former Soviet Republic and then lost pressure on its export lines to Europe, causing consternation among customers in Austria, Italy and Germany.

INFLUENCE IN GERMANY

Gazprom owns 51 per cent of North European Gas Pipeline Company (NEGPC), which is building a €5 billion gas pipeline connecting Siberia’s gasfields to northern Germany.

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