Germany and Russia sign major business deals

Apr 11, 2005 02:00 AM

German Chancellor Gerhard Schroeder and Russian President Vladimir Putin expanded their growing economic links with new natural gas and rail equipment deals.
The two leaders looked on as executives from German oil and chemical company BASF and Russia's Gazprom, the world's largest natural gas producer, signed a memorandum of understanding at the Hanover Trade Fair to expand cooperation in the production, transportation and sale of gas.

Schroeder said the deal was significant because it went beyond simply buying gas from Russia, which supplies about one-third of Germany's oil and gas needs.
"It's not just about a supplier relationship," Schroeder said. "It's the first time that a German company is involved in production in Russia."

In a second deal, German engineering conglomerate Siemens and Russian rail operator Russian Railways signed a EUR 1.5 bn ($ 1.94 bn) contract for building high-speed trains in Russia.
"I want to note that today's agreements show how important such cooperation is for Russia and for Germany," Putin said. "This is no ordinary event, this agreement between Gazprom and BASF. In essence, this is a move to a new level of cooperation," he said.

Gazprom and BASF's Wintershall unit said they will jointly develop the Yuzhno Russkoye field in Western Siberia and cooperate on a gas pipeline supplying Europe through the Baltic Sea.
Gazprom also said it will increase its share in a joint venture with Wintershall, signalling the Russian supplier's increased commitment to the European gas market.

Gazprom CEO Alexei Miller said his company will raise its stake in the Wingas joint venture to 50 % minus one share from currently 35 %. He said the deal will involve an "exchange of assets" with Wintershall, but no cash.
The deals are "of historic importance" and will strengthen the two companies' partnership along the entire gas chain from production to sale, Miller said. Wintershall currently holds 65 % in Wingas.

Also on the summit's sidelines, Gazprom said it is selling a 25 % stake in the Yuzhno Russkoye field to German energy company E.ON. Miller underlined that Gazprom intends to remain the field's majority owner.
The train deal offers the prospect of speeding up intercity rail transport in Russia. The new trains will travel at up to 300 km an hour (186 mph) and will be built mostly in Russia, the state railroad RZD said. They are intended for the heavily travelled Moscow-St Petersburg and St Petersburg-Helsinki, Finland routes.

Other potential uses were on the Moscow-Nizhny Novgorod and Omsk-Novosibirsk routes. The first train is scheduled for delivery by the end of 2007.
"We are pleased that we have already reached this initial concrete agreement. We are now on our way to getting the project started, thereby contributing to stronger Russian-German trade relations," said Hans M. Schabert, president of Siemens Transportation.

Schroeder said in his speech opening the fair that Russia is becoming an increasingly important trading partner forGermany.
"In order to foster security and prosperity in Europe and beyond, Russia and the European Union must work together closely," Schroeder said.
In building ties with Putin, Schroeder has favoured pressing him discreetly over his increasing control over Russian business and politics as opposed to the blunter US approach. One bond between the two leaders is the fluent German that Putin speaks from his time as a KGB agent in communist East Germany before the fall of the Berlin Wall.

Source: Forbes
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