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Siemens' Engagement in Russia

This is a guest post by Peter Männer, who is commenting regularly here under the pseudonym of 'Zyme' and working without it as a pupil barrister in Regensburg for the judiciary branch of Bavaria. 

Transatlantic relations as well as Franco-German relations are expected to suffer from the latest development of Siemens' engagement in Russia.

On February 2nd, Siemens declared that it was going to make use of its "Put"-option regarding its 34 % share of a joint venture with the French nuclear company Areva. This step has been made due to the fact that Paris had blocked Siemens for years from gaining influence on decision making within the 'AREVA NP joint venture'.

In Moscow on February 3rd, when Siemens CEO Peter Löscher and his board were presenting the operational results of the last quarter, they also announced an agreement with Russian Prime Minister Vladimir Putin containing an alliance between Siemens and the Russian Atomenergoprom. The latter has been founded in 2007 as a means of consolidating the entire chain of nuclear industry in Russia, covering all aspects from uranium mining to nuclear research, production and management of nuclear power plants as well as propulsions for nuclear submarines.

The Russian Prime Minister called the agreement a "large-scale partnership, ready to work in Russia, in Germany as well as in third countries", while the coordinator of energy policy for the conservative CDU/CSU parliamentary group in the German Parliament, Joachim Pfeiffer, explained that "politics must have an interest in Siemens maintaining and expanding its competence in nuclear energy, to be able to play a significant role on the world market."
Rather negative reactions followed from France and the United States.

Claude Mandil, a former executive director of the Paris-based International Energy Agency, pronounced his regret about the loss of a "European Partnership" between Siemens and the French Areva company due to Siemen's intentions. 

Le Monde went even further in considering this agreement as just the latest of Vladimir Putin's efforts about dividing the Europeans, calling it a "Looming German-Russian Axis in nuclear affairs".

From the United States, Stephen Szabo, the executive director of the Transatlantic Academy in Washington, warned Berlin from taking the road of the traditional German Seesaw policy between Washington and Moscow. In such moves he is seeing substantial differences between Germany and the United States regarding national interests, political cultures and their respective methods, which could endanger the revivement of the relationship between both countries.

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Joe Noory on :

This is a result of what's cutely euphemized as the "public-private partnership", as you can see by who the parties in this are: State-designate champion companies, and defacto state-run industries. They are so embedded in the structure of government that their corporate moves are percieved as international political moves. None of this would take place were it not for the concept of the "social market model" and the social-levelling efforts of governments thinking they need to put a huge number of mandates on industries and to somehow hobble them for social reasons. You can see that even if Putin's government DID want to "divide Europe" by doing this, a far-fetched idea which imagines that the function of businesses can somehow be explained away by state action, that it's for incredibly venal reasons. It bears no comparison to the US seeking allies among the European states that were not openly hostile to her in 2003, which is the obvious place a critique like this wants to go. The temptation is one of self-pity, but has to be tempered by the fact that everything that happens in Europe is not the fixation of governments world-wide, especially when it comes to would-be monopolists like Siemens, Areva, or the Russian maker of nuclear power plants.

Marie Claude on :

Joe, when nuclear is on the scene, you can't only leave it to private Cies to decide to whom they will sell their technology, otherwise all the non "civilised" states that can afford it would be equiped with it, and they would also built the "manufacture" to tranform the civil uranium into an arm, that is actually what is reproached to Iran. Even the US state sponsors his big enterprises, "Noam Chomsky also claims that capitalism in the USA is a state capitalist, citing the example of Boeing, MIT and the defense industry ... Agriculture... state spendings : ~ + 37% in the US in France ~ 43% in the previous years (it should be less now) As far as Siemens, this is more complicated, it's related to policies and concurrences 1- The Germains greens critisized Siemens participation into Areva Capital 2- Siemens failed to inluence (?) or to benefit from Areva world market openesses to develop their own alternative energy technologies within. I still remember how Sarkozy was critisized across the Rhein in 2007 when he sold a CIVIL nuclear reactor to Lybia, while the Germans were already there with the banner of alternative energy technologies. an exterp of their "ire" : "Le ministre délégué aux affaires étrangères allemand, Gernot Erler, a critiqué le protocole d'accord franco-libyen sur le nucléaire, mettant en garde contre le risque de prolifération, dans un entretien au quotidien Handelsblatt, à paraître vendredi 27 juillet. "Politiquement, cette affaire est problématique", a déclaré le ministre social-démocrate. Il a précisé qu'"en outre, le risque de prolifération augmente avec chaque pays qui utilise l'énergie nucléaire"." (Le Monde) I just can laught how hypocrite it is, now that Siemens joined Putin, they can supply their good ol friend Iran with nuclear energy (?) I read that the russian society also develops arms !!! As far as Putin wanting to devide Europe, I wouldnot bet on it, he was rather in an emergency need of fresh money. But I don't think that the Germans will be able to dictate him his nuclear or energy markets either

Joe Noory on :

Of course the export can be controlled. Russian and German technology sales to Iran are proof that this has nothing to do with that.

Joe Noory on :

Unlike Airbus, Boeing's "subsidy" is that they sell airplanes. If you want to call the sales to the US govenment and military that subsidy, you might as well call the Airbus aircraft purchased by the US government a US subsidy to Airbus. You know the incedents of those sales... every time it happens, the Parisian papers make a point of saying that it's a sign of national pride and lowbrow American inferiority, again a too-cozy conflation of corporate-nationalism, ego, and government direct involvement in industry. It's a funny thing to hear from the Nouvel Obs., Libe, and Courrier-Int. crowd that will conflate anti-corporate invetive with anti-American invective. The key to all of it being - "When it's convenient" to get angry about "big business".

Pat Patterson on :

One thing that seems to have been ignored is the perilous state Siemens finds itself. It would be interesting to find out what the strike price that Siemens has to be paid by Areva concerning its put option. Since the value of both companies has fallen some 60% in the last 52 weeks this situation could bankrupt Areva unless the French government steps in to guarantee Siemens price or allows Siemens to take over the company which was always its primary goal and since there are still at the talking stage its possible that Siemens is using the Russian monopoly as leverage. Siemens made a huge and smart bet that the price of Areva would go down and it has. Germany, to paraphrase an old Cold War headline, will have its finger on the trigger of the French nuclear industry. Germany, or rather siemens, has placed itself in the same position the US chemical companies Ciba and Montrose found themselves in a few years ago. It is illegal to sell DDT in the US but but not to own manufacturing plants in India and China. So similarly as Germany closes its own nuclear plants it embarks on manufacturing and selling the arguably unpopular technology to other nations via Russia's Rosatom. Also except for a few graduate students studying English and Hugo Chavez no one really takes Noam Chomsky to seriously any more. He seems to have destroyed his reputation by supporting Pol Pot, revealing himself to be a Troofer and holding on for dear life his corner office and clerical staff as an emiritus professor at MIT. In the belly of the beast so to speak, with a secretary and good coffee. But mainly because his description of capitalism in the US as being controlled by the state, usually he refers to that as economic fascism, is glib enough to only impress those who miss that the US has a mixed economy. Neither wholly free nor wholly under the control of the state.

Don S on :

Excellent point about the position Seimens finds itself in, Pat. Seimens is probably in a relatively favorable position in terms of capital, but I suspect their markets are disasterous, even compared to the serial cluster - er disasters going on elsewhere. Seimens is largely a capital equipment manufacturer in a depression which hits investment particularly hard. Seimens domestic market is hard-hit, and Germany's adverse demographics make it's future darker. By exercising it's put option Seimens wins one of two ways; either it takes over Areva, a company with attractive civilian nuclear technologies which are well-tested in the real world, and will be well-positioned to take advantage of that experience in the move to 'green power'. Failing that, Seimens gets to sell it's Areva stake to the French government at a multiple of current market value, which should strengthen the balance sheet nicely. There are going to be many bargains available for aquisitions over the next few years and the money will be useful. I think the Russian alliance is a seperate issue, perhaps a bit of Seimens' opportunism, opportunity to make some money.

Pat Patterson on :

On second thought Siemens may not have any current interest in Areva, the overtures to Russia might be a feint but cashing that put option would give them liquidity to weather the recession. It could also allow the company to buy some other companies for pennies on the dollar or Euro as the case might be.

Marie Claude on :

http://www.lesechos.fr/info/energie/4835690.htm Alstom, GDF Suez... will replace Siemens chomsky was the "cerise sur le gâteau", though the facts are there, you're like us, a state sponsored capitalist country

Pat Patterson on :

What is it to be then state capitalism or state sponsored capitalism? The latter doesn't make much sense and seems to be backtracking!

Pat Patterson on :

I'm not sure what conclusion you drew from the article as it makes absolutely no mention of the put option. Is Areva planning on getting the French government to bail them out somehow because it appears, via admittedly rumour, that the 34% stake in the company that Siements owns has an strike price equal to the entire assets of Areva. And there has been absolutely no mention of any deal with the Russians at all. High ho, high ho! It's off to court we go!

Marie Claude on :

from where are the rumors, never heard such ! well I understood that Areva is going to open its capital to a few smaller investors, in the meantime it will sell some of its investments abroad

Pat Patterson on :

Rumour=opinion pieces on various financial blogs. With no attribution thus I won't cite them except as rumours.

Dwight on :

I know that Germany's Siemens and Russia's state nuclear company have pledged to look at closer cooperation in what Russia said could lead to a powerful alliance in the world nuclear market. Moreover Siemens and Russia's Rosatom want to assess closer ties in the field of atomic energy.

Marie Claude on :

funny, are money gains there ? umm energies are the next decades main investment, be them nuclear, oil, gaz, charcoal... forget the green alternatives', just good for 68tard dreamers !!!

Josef on :

I also have read in the media recently that Russian officials signalled support for a proposed nuclear co-operation deal between German industrial giant Siemens and Russia's atomic energy agency.Putin also suggested a Russian-German joint venture could target the growing world market for commercial nuclear energy. To my mind it is not good news.

Carl Kuhn on :

AREVA is a tiny company compared to Siemens. Alone Siemens' china business is larger then the whole AREVA. Siemens is well established in the conventional island part of the business and really does not need AREVA's help there. The customers normally do not want everything from one company but they like to choose the components from different ones. AREVA is also strapped of cash and human resources and their performance running most projects is disastrous. Siemens is doing good in splitting up from them and taking the cash also in opening new options in cooperation with Russian nuclear vendors. Within that cooperation Siemens can develop it's own products for the nuclear island. Siemens focus there is mainly I&C amyway. AREVA's I&C product used to be a Siemens one developed many years ago but they have a terrible time handling that correctly.

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