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RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHDF #0049/01 3541711
ZNR UUUUU ZZH
R 201711Z DEC 06
FM AMCONSUL DUSSELDORF
TO RUEHC/SECSTATE WASHDC 0050
INFO RUCNFRG/FRG COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHDF/AMCONSUL DUSSELDORF 0062

UNCLAS SECTION 01 OF 03 DUSSELDORF 000049 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EINV ENRG PGOV RS GM
SUBJECT: RUSSIAN INTEREST IN INVESTMENTS IN GERMANY 
 
REF: MUNICH 767 
 
DUSSELDORF 00000049  001.2 OF 003 
 
 
Sensitive but Unclassified - Contains Proprietary Information. 
Not for Internet Distribution 
 
¶1.  (SBU) Summary:  Russian interest in buying into 
German/European companies, including Deutsche Telekom and energy 
companies has been a front page story.  At the moment, in North 
Rhine-Westphalia (NRW) and other parts of Germany, the level of 
actual transactions has not come close to equaling the level of 
press coverage.  Still, there are signs of strong Russian 
business/economic interest in NRW and other parts of Germany. 
Gazprom and the German energy giant E.ON Ruhrgas are sponsoring 
high visibility sporting and cultural events as part of a PR 
strategy to generate goodwill.  Russia recently appointed 
Ruhrgas CEO Dr. Burghard Bergmann as Russian Honorary Consul in 
Duesseldorf, following similar moves involving prominent German 
businessmen in Stuttgart and Nuremberg.  For now, the German 
business community seems more interested in selling to and 
investing in Russia than allowing Russian firms to gain a 
foothold in Germany, but there is still a sense here that 
Russian funds looking for known, safe, and profitable places to 
be invested, may flow west to Germany.  End Summary. 
 
Sistema Eyes Deutsche Telekom 
--------------------------------- 
 
¶2.  (U) In late November, Sistema chief (and 62 percent 
shareholder) Valdimir Yevtushenkov confirmed his company's 
interest in buying a quarter of Deustche Telekom, as well as 
that Russian President Putin had raised the issue with 
Chancellor Merkel during his visit to Germany.  Yevtushenkov 
told Germany's "Der Spiegel" he plans to incorporate Sistema's 
mobile phone subsidiary MTS, Eastern Europe's largest mobile 
phone company, into DT, in exchange for 25 percent plus 1 share 
of DT shares.  Such a deal would make Sistema the second largest 
DT shareholder and give them a blocking minority.  The German 
government, which through parastatal KfW Bank directly or 
indirectly controls more than 30 percent of DT shares, would 
remain the biggest shareholder.  The second largest shareholder 
currently is U.S. private equity firm Blackstone, which acquired 
4.5 percent of DT shares in spring 2006. 
 
¶3.  (U) The Russian approach generated a major controversy and 
subsequently has seemed to be put on ice.  An unnamed member of 
the DT Supervisory Board called the approach an 
"industrial-imperialist attack by a Russian clique motivated by 
power politics" and DT quickly formulated a defense strategy 
against Sistema's bid.  Yevtushenkov told the German press 
Sistema would not force the issue and would not move against the 
wishes of the German government.  He also denied that Sistema 
already owned DT shares.  An Embassy contact with connections to 
DT, however, told us that Sistema recently commissioned a German 
bank to buy up DT shares silently.  The Finance Ministry's 
spokesperson, however, has stated Sistema's interest in DT is 
not an issue for the German federal government. 
 
Speculation on Gazprom's Interest in RWE 
-------------------------------------------- 
 
¶4.  (SBU) Germany's second largest energy company, RWE, based in 
Essen, may also be of interest to Russian industry, but again 
the issue seems to have been exaggerated in the German press. 
Gazprom, which supplies approximately 34 percent of Germany's 
natural gas needs, was reported in November to be interested in 
buying RWE shares owned by the City of Duesseldorf after Lord 
Mayor Joachim Erwin (CDU) reportedly expressed interest in 
selling them to eliminate his municipal debt.  A senior official 
in the Mayor's office, however, told us the media had 
over-interpreted an off-hand remark by Erwin over how he wanted 
to make the city debt-free by 2007.  Duesseldorf holds about one 
percent of RWE shares.  The NRW cities of Essen, Dortmund and 
Cologne have larger shares, but made clear after this stir that 
they would not sell their stakes in RWE. 
 
¶5.  (U) In late November, Gazprom Germany chief Hans-Joachim 
Gornig told the Berlin daily  "Tagesspiegel" that his company's 
interest in investing in Germany was "very limited at the 
present time," citing strong regulation of the German energy 
market.  He also denied any exploratory talks regarding RWE, let 
alone negotiations on buying shares.  He conceded, however, that 
Gazprom continues to engage in exploratory talks with German 
firms. 
 
Gazprom Tries to Move into German End-User Market 
--------------------------------------------- ----------- 
 
¶6.  (U) Earlier this year, Gazprom unsuccessfully tried to swap 
exploration rights in its Yuzhnoi-Russkoi field for a stake in 
Ruhrgas' German operations.   This move was rebuffed by Ruhrgas' 
parent, the Duesseldorf-based energy giant E.ON.  Following this 
 
DUSSELDORF 00000049  002.2 OF 003 
 
 
move, speculation persists that Gazprom seeks to secure a stake 
in the German energy market via RAG, the Essen-based 
conglomerate with a large energy component, once it goes public 
in 2007.  To underline its commitment to the region, Gazprom 
signed an agreement this fall with one of the most prominent 
soccer clubs in Germany, Schalke 04 from Gelsenkirchen/NRW, 
making Gazprom their main sponsor for the coming years.  A 
Schalke executive recently told the CG that Gazprom has 
committed to pay up to 125 million euros to the team, depending 
on how well it fares during coming seasons.  Given 
Gelsenkirchen's depressed economy, Gazprom's gesture has earned 
the firm considerable good will in this enthusiastic soccer 
region. 
 
Ruhrgas CEO Appointed Russian Honorary Consul 
--------------------------------------------- ------- 
 
¶7.  (U) In late November, Russia announced the appointment of 
its new Honorary Consul in Duesseldorf, Dr. Burkhard Bergmann, 
CEO of Ruhrgas.  Bergmann is also Deputy Chair of German 
industry's East Committee (Ostausschuss) and is the first and 
only non-Russian on the Gazprom Board in Moscow.  He becomes the 
third prominent German businessman to receive such an 
appointment, after Klaus Mangold (ex-DaimlerChrysler Services 
CEO) was named Russian Honorary Consul for Baden-Wuertemberg and 
Nikolaus Wilhelm Knauf in Nuremberg for parts of Bavaria. 
 
¶8.  (SBU) At the high-profile presentation in Duesseldorf, 
featuring speeches by Minister President Ruettgers and the 
Russian Ambassador, Bergmann forecast a major role for Russians 
to play in NRW.  There are 411,000 Russian citizens and 130 
firms from Russia in the state.  He highlighted Ruhrgas' past 
sponsorship of major Russian-German cultural projects, such as 
the financing of the recreation of the legendary Amber Room 
(Bernsteinzimmer).  He also spoke about E.ON Ruhrgas plans to 
bring more pieces of art from major Russian art museums (e.g., 
Tretyakov and Pushkin) to NRW in 2007 as part of the firm's 
broader PR strategy.  Minister President Ruettgers in his 
presentation listed a number of statistics attesting to the 
growth in ties between NRW and Russia:  trade flows increased by 
20 percent in 2005 and doubled in the 2003-2005 period.  Three 
hundred firms from NRW have offices or operations in Russia. 
There are 55,000 Russian Jewish imigris in the state as well as 
some 800,000 Germans of Russian origin (Spaetaussiedler).  The 
state has 20 sister-city relationships and 80 school 
partnerships.  There are 700,000 native Russian speakers in NRW. 
  Russian Ambassador Vladimir Kotenev added that 1/6 of trade 
between Russia and Germany is with NRW, and stated there are 
four partner region relationships between NRW and Russia. 
 
Russian Interest in Southern Germany 
-------------------------------------- 
 
¶9.  (U) Russian President Putin visited Munich October 11 after 
meeting the Chancellor in Dresden.  Hundreds of businessmen were 
invited to a dinner with Putin hosted by the Munich Chamber of 
Commerce.  In his dinner speech, Putin stressed the time is 
right for Russian investment in Germany and the rest of Europe 
-- nobody should be afraid of Russian dominance or German 
dependence on Russian oil and gas.  Putin said he did not 
understand German nervousness, as Russian partners are no less 
capitalist than their Western counterparts.  A State Chancery 
contact told CG Munich that while Stoiber desires to strengthen 
Russian-Bavarian relations and create a free trade zone between 
the EU and Russia, he still considers a stronger transatlantic 
partnership to be the priority. 
 
Russians Look to Expand Presence/Economic Ties in Frankfurt 
--------------------------------------------- ------------------- 
 
¶10. (U) Russia has also been looking to expand its 
diplomatic/economic footprint in the Frankfurt area for a number 
of years and the November 22 symbolic dedication of the Russian 
Consulate General in Frankfurt has moved them a step closer. 
There has been much media attention and speculation surrounding 
establishment of a Russian Consulate General in Frankfurt over 
the past couple of years, but few concrete details.  Earlier 
reports suggest that it will be a major operation (3,000 square 
meters) with over 200 employees.  It remains unclear as to when 
the Consulate will officially open--Russian officials have been 
tight-lipped regarding the specifics.  Given recent reports that 
nearby Wiesbaden may host the November 2007 visit by Russian 
President Putin, there is a sense that the Consulate may open 
soon. 
 
¶11.  (SBU) Comment:  Increased Russian interest in Germany, at 
the both the economic and cultural level, reflects historical 
ties as well as current economic realities.  Russian energy 
companies are awash in petrodollars that need to be invested 
somewhere.  Russia's historic ties with Germany, as well as the 
 
DUSSELDORF 00000049  003.2 OF 003 
 
 
strength and transparency of its economy, makes it a natural 
choice for Russian business.  Germans are still quite hesitant 
to give Russian companies a voice in major concerns, especially 
assets, such as energy companies, that have national security 
ramifications.  Chamber of Commerce officials and businessmen in 
NRW who deal with Russia frequently stress the difficulties they 
face while there, but add they expect economic and commercial 
ties to continue to grow and will prosper.  Until now, German 
interest has been more to sell their products in Russia and to 
invest there to serve that market, rather than to encourage 
Russian firms to invest in Germany.  End Comment. 
 
¶12.  (U) This cable has been coordinated with Embassy Berlin, 
with input from Consulates General Frankfurt, Munich, Hamburg 
and Leipzig. 
BOYSE