Medvedev Seeks to Woo Merkel With Gas as Nuclear Plants Close

Russian President Dmitry Medvedev said OAO Gazprom should export more natural gas to Germany after Chancellor Angela Merkel decided to close all of the country’s nuclear-power plants by 2022.

Russia, the biggest supplier of gas to Germany, will “focus more on natural gas exports” after Merkel decided in June to accelerate plans to phase out nuclear power, according to the text of a Medvedev speech distributed today in Hanover, Germany. Russia also aims to woo German utilities in “asset exchanges and ecologically clean technology transfers,” according to the text.

Gazprom expects Germany’s exit from nuclear power to boost demand for its fuel supplies, Deputy Chief Executive Officer Alexander Medvedev said July 8. Russia’s export monopoly needs to cuts its prices to win more custom, Merkel told reporters today, adding that Germany may only need about 10 gigawatts a year from 2015, an amount that isn’t an “an over-sized target.”

Merkel is under pressure to consider alternatives to nuclear power, which generated 23 percent of Germany’s electricity in 2010, according to the Economy Ministry.

“It’s up to German companies to decide whether they buy more Russian gas,” Merkel told reporters after the talks. “The cheaper it’s priced the more likely it is to be bought.”

‘Cold Shoulder’

Merkel’s “right to cold-shoulder” Medvedev’s offer to expand gas supplies, said Claudia Kemfert, who heads the Berlin- based DIW economic institute’s energy unit, in an interview today. “Russian gas is simply too expensive and touting sweeteners like asset exchanges and a slice of the cake in modernizing Russia’s energy grid aren’t convincing.”

Bound to long-term contracts with Gazprom, prices paid by utilities for gas imports may hamper German plans to build more gas-fired power generators, Kemfert said.

German gas-import prices jumped on average 28 percent in January-May compared with the same period a year ago, the Economy Ministry’s BAFA unit said July 15. Germany paid 12.1 billion euros ($17.1 billion) for gas imports compared with 9.3 billion euros a year ago, while in volume terms imports rose 1.1 percent to 1.76 million terajoules, the Eschborn, Germany-based unit said.

RWE, Germany’s second-biggest utility, has said it plans to build three coal-fired plants by 2013. As yet, it has no plans to build gas plants.

Russia is seeking German partnerships in a bid to modernize its energy infrastructure by 2020, Energy Minister Sergei Shmatko told reporters yesterday.

Gazprom and Essen-based RWE said July 14 they would expand cooperation, including in the U.K. Gazprom has made the power industry a priority for European expansion, CEO Alexei Miller said on the same day.

German-Russian trade may reach a high of 70 billion euros ($99 billion) in 2011, beating the previous record of 58 billion euros set in 2008, according to the German BDI industry association.

To contact the reporter on this story: Brian Parkin in Hanover at bparkin@bloomberg.net Ilya Arkhipov in Hanover at iarkhpov@bloomberg.net

To contact the editor responsible for this story: Leon Mangasarian in Berlin at lmangasarian@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.