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Cyril Widdershoven

Cyril Widdershoven

Dr. Cyril Widdershoven is a long-time observer of the global energy market. Presently he works as a Senior Researcher at Hill Tower Resource Advisors. Next…

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Putin Orders Asset Seizures From Austrian and German Energy Giants

  • Putin's decree targets OMV and Wintershall DEA assets in Russia, signaling an aggressive retaliation and a strategic move to control Western assets in Russia's Arctic.
  • OMV and Wintershall DEA report nationalization of assets, with significant production losses and potential financial impacts.
  • The article highlights the broader context of economic warfare between Russia and the West, with Putin's offensive moves seen as a response to Western sanctions and pressure to support Ukraine using seized Russian assets.
Putin

Western sanctions on the Russian oil and gas sector and entities have not yet been as functional as expected by most. Still, Moscow’s energy stranglehold on Europe’s energy sectors has been broken by Western actions. Until now, Russian President Vladimir Putin has not been hitting back with a vengeance, but that looks like it's about to change. Putin has ordered the seizure of Austria’s OMV and Germany’s Wintershall DEA assets in Russia. The main aim is clearly to hit back at the West while also cementing control of the existing Western assets in Russia’s Arctic, which are still valued at several billion dollars. As Russian reports stated yesterday, under the presidential decrees published on December 19, stakes in the Yuzhno-Russkoye field and in the Achimov projects, held by OMV and Wintershall DEA, will be reverted to newly created Russian companies. The move is a clear break with still existing ties with Germany and Austria. Both German-speaking countries are officially in the Ukraine Camp, supporting the Ukrainian military campaign against the Russian invasion, but politicians inside both countries are still very diffuse in their own views or future strategies. Mainstream German and Austrian politicians are still open to a rapprochement with Moscow’s leader Putin, sometimes even indicating an interest in Russian energy imports. 

Putin’s decrees however have undermined these Kremlin factions inside of Berlin and Vienna’s power circles. The Russian leader has chosen to go on the attack, not because of a strong position or a winning strategy in Ukraine, but mainly due to the need to gain access to additional revenue options, while indicating to the West that he is willing to wage an economic war too. The new moves are inline with other seizures already in place, such as the eight breweries of Carlsberg and several factories of French food giant Danone. 

When looking at the existing confrontation between Russia and the West, Putin’s move should not be very surprising. Since 2022, hundreds of billions of dollars worth of Russian assets have been frozen in the West. At the same time, the assets of Russian investors and businessmen have been seized. Germany has been at the forefront of this since the Russian invasion of Ukraine, as shown by Germany taking control of major Russian-owned Schwedt oil refinery which supplies 90% of Berlin's fuel. The nationalization of former Gazprom Germany GmbH, now called SEFE, is another sample. 

At the same time, the seizure of OMV and Wintershall DEA assets in Russia should be put in light of the growing pressure on Western, or especially European, governments not only to seize Russian assets or financial reserves but also to start using seized Russian assets to support Ukraine in its military conflict with Moscow. The Biden Administration’s struggles with releasing a new financial and arms package for Ukraine are particularly pertinent. European moves to release Russian assets to fund Ukraine’s economy and military very soon are seen by Russia as an additional attack. At present, based on current information, Russian assets of around $300 billion have been seized or frozen. If part of these funds can be transferred to Ukraine, to finance Kyiv’s war effort or reconstruction, it would be seen as a significant blow to Putin.

Wintershall and OMV also have reacted to the seizure of their Russian assets. Both parties have indicated that the situation at present is that all their assets have been nationalized, so should be written off. BASF and Wintershall Dea indicated that the seizure of its Russian assets will have a detrimental effect on its production, as Russian projects accounted for half of its total production. Wintershall Dea, which at present is still a JV between BASF and Russian billionaire Mikhail Fridman’s investment company LetterOne. At present Wintershall already was in the process of exiting Russia. Austrian oil and gas company OMV already left Russia in 2022.  In 2024, Wintershall Dea’s activities with or inside Russia will be legally separated. 

CBR

When looking at the potential financial loss of both entities, Wintershall Dea already reported a net loss in 2022 of EUR 7.3 billion due to impairment caused by the deconsolidation in Russia. In the same year, OMV expected a potential loss of EUR 1.5-1.8 billion from the Russian pullout. Information at present indicates that the stakes in the Achimov projects will be transferred to specially set up limited liability companies, which will be offered for evaluation and sale to a little-known company called Gazovyye Tekhnologii. The OMV assets are expected to be sold to the joint stock company SOGAZ, which provides insurance to Gazprom. 

By Cyril Widdershoven for Oilprice.com

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  • Mamdouh Salameh on December 20 2023 said:
    President Putin can exchange the seized Energy assets belonging to Austrian and German gas giants against Russian assets held in Europe and.United States including 300 billion dollars belonging to Russia’s Central Bank’s held by European and American banks.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert
  • Kris Poole on December 20 2023 said:
    I think President Putin have shown lots of restrain in dealing with the U.S. led coalition of NATO and EU, in the proxy war with Ukraine. But at this point there is NO ONE in the so called collective West to to show the same. It's been 2 years of constant escalation, whether economic or military. The economic sanctions backfired at the West big time, pushing the biggest economy in Europe, Germany into recession, de-industrialization. Cheap Russian oil and gas for Germany industries is NO more. Now most of the Russian oil and gas is flowing to Asia, China, India, where it gets repackaged and sold triple the price to hungry EU customers. Russia's economy is forecasted to grow about 3-5% next year. On military front Russia is prevailing as well grinding down the Ukraine military, and collective West resources with it. The U.S/EU seizing Russian assets will have again huge consequences for the collective West causing even more capital flight, and economic hardships.

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