EXCLUSIVE: The Russian natural gas company Gazprom, which supplies much of Europe’s gas imports, is at the center of a secretive cabal of mostly state-owned natural gas companies that has been operating for two decades under the aegis of the United Nations, according to a first-ever audit of the operation obtained by Fox News.
Even though it is a U.N. entity, the group, known simply as the Gas Centre, runs on a budget funded by its corporate members. Its supervisory Executive Board has never been approved by the U.N. agency of which it is nominally a part, the United Nations Economic Commission for Europe, or UNECE. The group’s priorities, and its detailed budget, likewise manage to stay below the U.N.’s supervisory radar.
According to the U.N., the Gas Centre’s mandate is purely technical, and related to issues of gas contract methodology, collection of statistical databases, and the promotion and facilitation of foreign investment in the industry.
But in fact its mandate, as gleaned from U.N. documents examined by Fox News, includes the creation and maintenance of a “dialogue” on such issues as “the restructuring and consolidation of the gas sector, facilitation of “the integration of natural gas industries in Europe through greater convergence and harmonization of norms and practices,” and “know-how on legal and regulatory matters [and] gas market liberalization.”
In other words, matters that bear greatly on Europe’s energy future, and on Gazprom’s current and future role -- and influence -- in Europe, which is now in turmoil over Russia’s aggressive actions toward Ukraine, with their implications for the continent’s stability, not to mention energy security.
The nature of the Gas Centre, its secrecy, and its non-governmental membership is highly unusual.
Just exactly what is discussed in Gas Centre meetings is unknown, according to the audit, which was produced by the U.N.’s watchdog Office of Internal Oversight Services, or OIOS, and is discreetly titled, “Audit of selected projects in the Sustainable Energy Division of the Economic Commission for Europe.”
The nature of the Gas Centre, its secrecy, and its non-governmental membership is highly unusual, and perhaps unprecedented, in the U.N. system -- and has apparently raised qualms in at least one-unnamed U.N. member state, which put in a written request to the U.N. that sparked the audit.
As the auditors primly put it: “This absence of oversight and public reporting increased the risk of the Gas Centre being perceived to be focused on private interests, particularly since it was fully funded by its member companies.” They suggested, among other things, that the organization’s “governance and working arrangements” needed to be “formally reviewed and approved”-- putting it on a similar basis to the rest of the organization.
The Centre’s membership -- which has grown from a handful of companies to roughly 20 today, according to its website -- meets at least once a year in Geneva, to approve the budget (from the limited documentary evidence available, less than $400,000 annually for meetings and secretariat services) and the group’s priorities, or “work plan.”
Other U.N. bodies within UNECE linked to the Gas Centre -- and which represent U.N. member governments -- have no say in approving or endorsing those decisions, according to the audit. Details of the budget, and what it is being used for, are examined by the Centre’s Board, meaning its membership only. The budget and reports about its activities are relayed to other U.N. bodies that nominally control it in summary form and those bodies don’t have any involvement in approving or endorsing the plans.
Moreover, “the presentations or reports of the meetings were not made public.”
If anything, amid the growing turmoil between Russia and Ukraine that has shaken Western Europe’s sense of security and its natural gas markets, the Gas Centre’s inner workings have become even more secretive: its sketchy U.N. website went off-line recently for several weeks, and re-emerged in May mostly behind a screen of members-only passwords. (Along with Gazprom, Ukraine’s biggest natural gas company, Naftogaz, is also a member.)
According to the U.N., the Gas Centre was launched in 1994 as a deeply apolitical “technical cooperation project” entitled “Promotion and development of a Market-Based Gas Industry in Economies in Transition.” Its aim, according to a U.N. official who knows the institution, was to teach natural gas companies in post-communist countries how to operate as Western-style state-owned utilities. Its first focus was on Russia, Poland, Czechoslovakia and Hungary. Gazprom was by far its most important charter member.
Currently, its discussions apparently include such topics as whether to rely on long-term vs. short term natural gas contracts, and whether to index the price of those contracts to oil, or rely on price competition among gas suppliers. (Both the long-term and oil-linked positions, according to the official, are held by Gazprom.)
In reply to questions from Fox News, a spokesman for the Centre declared that “The topic of Ukraine has been studiously avoided by the member companies, at least on our platform.”
The Centre’s mandate, officials note, has been approved by UNECE’s member states. But the unit has moved well beyond teaching communist bureaucrats how to run a business. It is now considered an “ongoing program of work”-- meaning a continuing mission -- of UNECE itself, an organization that claims to promote pan-European economic integration, including greater ties with the U.S.
According to the Centre’s website, its activities are focused on, among other things, the “exchange of information and data” on gas markets and gas industry, and “exchange of information and views between the gas industry, [UNECE] and government on policy issues.”
But the second of those can cover a lot of ground. The mandate of the Centre, which has been “extended regularly” according to the Centre spokesman, is embedded within the mandate of yet another UNECE sub-organization, and includes not only discussions of gas industry integration, but “security of natural gas supplies,” “gas pricing principles and practices,” and the exchange of information and experience on “emerging trends and developments in the gas markets and in gas industries, including on investment issues.”
The UNECE entity within which the Gas Centre is embedded also includes in its mandate “enhancing” sustainable energy development in the region, and “creation of a unified gas market.”
The Centre’s membership has now grown to about 20 companies, with less than half of them in former Eastern Europe. Other gas companies come from Germany, France, Italy, Britain, the Netherlands, Egypt, Turkey and Algeria. Absent from the listings is any U.S. firm.
What each company pays toward the Centre’s budget is another private matter.
In the case of a company like Gazprom, however, the interests it is most frequently charged with representing are those closely tied to the ambitions of Russian President Vladimir Putin, and his aggressive policies toward former Soviet subject-states, nowadays led by Ukraine.
And Putin’s policies are closely tied to Gazprom’s role as Europe’s pre-eminent natural gas supplier -- a huge role that is rapidly growing even further with the active support of UNECE, which favors deeper and broader energy integration between the West and Russia, not only in the provision of natural gas for industrial purposes, but also as a vital transport fuel.
One signal of Gazprom’s importance in Russia’s foreign policy is that its chairman, Viktor Zubkov, served as Putin’s prime minister from 2007-2008, during Putin’s second term as president, and as Putin’s deputy prime minister from 2008-20012, when the Russian autocrat took a constitutionally mandated timeout from the presidency to take Zubkov’s old job.
In other words, when Gazprom talks, people listen -- carefully.
The question is whether a U.N. audit that questions the Gas Centre’s clubby secretiveness will make what Gazprom and other members are discussing under U.N. auspices any clearer to the public.
Perhaps. According to the audit itself, the Gas Centre has agreed that its “governance and working arrangements, reporting requirements, work plans, annual budgets and long-term plans or strategies” are reviewed and formally approved by UNECE’s “relevant governing body.” The deadline: the end of this year.
George Russell is editor-at-large of Fox News and can be found on Twitter @GeorgeRussell