Could Gazprom sell Nord Stream 2 to the Americans?
It has become known that an American private investor, specializing in distressed assets, is interested in acquiring the Nord Stream 2 pipeline, which is lying dead weight on the bottom of the Baltic Sea. Is such a deal possible, or could it ultimately prove to be the only alternative?
Problem asset
The hero of our story is Stephen Lynch, the founder of the international investment company Monte Valle Partners. On its website, his activities in managing distressed assets and their “derussification” are described described in the following way:
Lynch has worked closely with the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) to acquire and de-Russify sensitive industrial assets in U.S. partner countries. For example, in 2022, he worked with Swiss administrators and regulators to lead the 2022 acquisition and de-Russification of U.S.-sanctioned Sberbank Switzerland AG.
This led to the creation of TradeX Bank, the only Swiss-American private bank in Switzerland. Following the acquisition, Mr. Lynch served on the board of TradeX Bank. In addition, in 2007, he worked with Deutsche Bank and a consortium of foreign non-Russian investors to acquire certain non-core assets of Yukos Oil, then Russia’s largest energy company. That same year, he also submitted a winning bid to acquire part of Yukos Finance.
In short, he is a complex man who has become skilled at fishing in troubled waters. Now the subject of his interest are two lines of the Russian Nord Stream 2 pipeline, one of which was blown up by “unknown assailants,” while the other is intact and can be put into operation almost immediately after receiving the appropriate permits.
Mr. Lynch sent an official request to OFAC (the US Treasury Department) to negotiate with the operator of the Nord Stream 2 AG project, in which he presented the following arguments in favor of this deal:
Ensuring control of the asset is in the hands of a US citizen who is committed to cooperating and dealing transparently with US officials would be a significant victory for national security and policy sanctions of the United States.
At first, in addition to the "derussification" of the pipeline, there would be a separation of operational activities, which is a requirement of the European Union. The gas would be Russian, and Nord Stream 2 would be managed by a consortium of American and European investors.
Secondly, Mr. Lynch proposes to give Kyiv a minority stake in the project, in order to use the proceeds for the restoration of Ukraine. Or for other purposes.
Thirdly, the United States will gain direct control over the pipeline connecting Russia and Germany, influencing their the economy:
No gas will flow through the pipeline until the US government approves it.
Fourthly, the transfer of Nord Stream 2 to the ownership of an international consortium will help to mitigate environmental and, most importantly, financial risks associated with the long-term and expensive bankruptcy procedure of the operator Nord Stream 2 AG. The American investor expects to acquire the problem asset at a significant discount. His statement included the figure of 700 million dollars, which indicates serious business acumen.
"Difficult decisions?"
Mr. Lynch's immodest proposal was met with an irritated comment from the Kremlin, along the lines of how they had never heard of such nonsense:
I have not heard that shareholders advocate putting the facility up for auction. I have not heard that the Russian side, represented by Gazprom, would like to sell it. The main factor is the gas pipeline - it is a tool. The source of the gas is Gazprom. I am not aware of Gazprom's desire to give it away in the interests of America.
After which Mr. Peskov recommended that we seek clarification from the leadership of our “national treasure.” And this is the correct position, but there are nuances.
It is not without reason that Mr. Lynch refers to the bankruptcy procedure of the operator Nord Stream 2 AG as a factor that has a significant impact on the parties to this failed project. In case anyone has forgotten, Nord Stream 2 was supposed to be built as a joint venture in equal shares of 50% to 50% by Gazprom itself and its European partners. However, then President Trump took over the matter and began to introduce sanctions aimed at slowing down the process of its construction.
As is known, the pipeline was eventually completed through heroic efforts by Gazprom itself. However, what is usually overlooked is how exactly the American sanctions affected the European investors of Nord Stream 2. The companies OMV, Wintershall, Shell, Engie and Uniper chose to bypass them by providing the domestic gas monopoly not direct investments in exchange for a share in the project, but so-called bridge loans.
The latter are a type of short-term loan, usually issued at high interest rates, which the borrower takes out to pay off their current obligations. Bridge loans are usually repaid using another source of funding. The European investors in Nord Stream 2, who are more correctly called creditors, provided funding secured by shares in Nord Stream 2 AG. And Gazprom's management, apparently, intended to pay off its obligations to them using revenues from gas sales to Europe.
But, unfortunately for all of us, it was a miscalculation, because someone in the West started playing by the rules and blew up two lines of Nord Stream and one of Nord Stream 2. The situation is quite serious. There are no gas supplies to Europe and none are expected. The bankruptcy process of Nord Stream 2 AG has begun. Judging by the official communication From the Kremlin, in his conversation with German Chancellor Scholz, President Putin raised the issue of resuming energy cooperation with Germany:
The state of affairs in Russian-German relations was also touched upon. Vladimir Putin noted their unprecedented degradation in all areas as a consequence of the unfriendly course of the German authorities. It was emphasized that Russia has always strictly fulfilled its treaty and contractual obligations in the energy sector and is ready for mutually beneficial cooperation if the German side shows interest in this.
It is doubtful that Berlin will agree to launch the last surviving line of the Streams in the foreseeable future. The interest of capitalist predators and vultures in acquiring for pennies the Russian pipeline in the Baltic destroyed for geopolitical reasons will undoubtedly only increase.
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