German Gas Deal Killed by Russian Crisis

Fallout continues to spread from the crisis in Russia with a big gas deal involving Germany being cancelled.

BASF said it dropped its plans to hand complete control of its gas trading and storage business to Gazprom from Russia in exchange for a stake in two gas fields in Siberia.

Gazprom, which is state controlled, is the biggest supplier to western Europe of natural gas and has looked at developing its distribution and marketing activities across the region.

However, the problem in relations between Russia and Germany killed the swap of assets deal.

Sanctions that were imposed against Russia over its involvement in Ukraine placed restrictions on new energy and equipment projects and prevent companies in Russia from borrowing in financial markets in the West.

The cancellation has caused the chemicals company from Germany to restate its accounts for 2013 and to write down its 2014 profits, at a cost for the two of $395 million.

Gazprom and BASF have worked on projects together for over 20 years and continue to operate a joint venture in the gas trading business.

Other big deals in energy have become victims of the deterioration of relations with countries in the West.

Valdimir Putin the President of Russia announced earlier in December that Gazprom scrapped plans to construct a new gas pipeline for $40 billion to southern Europe.

With Russia not able to raise financing from U.S. and European investors, Gazprom might have struggled with funding to construct the pipeline.

Some states in the European Union were nervous the project could make them more dependent upon gas from Russia during a time that they were looking for more diversification in energy supplies.

Many large Western based companies that are in Russia have experienced economic hardships due to the sanction imposed by the EU and the U.S. on Russia.

The economy in Russia has struggled since the sanctions were imposed and the local currency has been deflated this week due to the sanctions.



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