Via Stratfor (subscription required), analysis of Gazprom’s $4.2 billion acquisition of the 20 percent stake in Gazprom Neft held by Italian energy giant ENI.  As the article notes, the original purchase by ENI was never intended to result in a permanent stake in Gazprom Neft, but rather to help Gazprom fight off a challenge from rival Rosneft:

“…Gazprom will pay $4.2 billion for the 20 percent stake in Gazprom Neft (formerly Sibneft) held by the Italian energy giant ENI — Gazprom currently owns 77.66 percent of Gazprom Neft. ENI CEO Paolo Scaroni said April 7 that the price is the same as the one originally paid by ENI — a bargain price — plus interest and transaction costs. ENI bought the shares of Gazprom Neft in an April 2007 auction and immediately gave Gazprom a two-year option to buy back the shares. Gazprom will also buy a 51 percent stake in SeverEnergia worth approximately $1.5 billion — SeverEnergia is jointly owned by Italian energy companies ENI and Enel. The repurchase ends speculation that Gazprom would not be able to buy back the stake in Gazprom Neft due to financial difficulties.

The shares of Gazprom Neft came up for auction as one of the many pieces of the final breakup of Russian energy company Yukos, whose chairman Mikhail Khodorkovsky was sent to prison on tax evasion charges. Gazprom and its energy competitor Rosneft (also state controlled) were in a bitter battle over who would pick up most of the Yukos assets. The 20 percent stake in Gazprom Neft was the last and largest piece at the auction. Having already purchased a number of assets and fearing that it was overstretched, Gazprom had ENI pick up the stake for “safekeeping” from Rosneft. ENI initially wavered on taking such a large financial and political undertaking, but Gazprom’s persuasive ways (especially with Scaroni) worked. The announcement by Gazprom that it will keep its end of the bargain to repurchase the stake in Gazprom Neft allowed ENI to breathe a sigh of relief, because investors were already putting pressure on ENI’s stock on the grounds that a failure of Gazprom to repurchase would have caused the Italian company to cut dividends.

The agreement to purchase the controlling stake in SeverEnergia, the other part of the deal between Gazprom and ENI, will be finalized at the end of April when Italian Prime Minister Silvio Berlusconi visits Moscow for talks with Russian Prime Minister Vladimir Putin (a visit that was supposed to happen in early April, but was delayed due to the earthquake in central Italy). SeverEnergia was formed out of the liquidated energy assets of Yukos that ENI and Enel picked up at the same April 2007 auction as the 20 percent stake in Gazprom Neft. The ex-Yukos assets, Arcticgaz and Urengoil, have almost 28 billion cubic feet of natural gas (total Russian natural gas reserves amount to 1.68 trillion cubic feet and total Russian annual exports in 2007 numbered 6.75 billion cubic feet).

The ENI-Gazprom relationship is one lubricated by high-powered political dealings at the highest echelons of power in Italy and Russia. For Russia, the close dealings with the Italian energy companies are an integral part of keeping Italy friendly to Moscow. The Kremlin uses energy deals to lure Italian companies — and by extension, the natural-gas-dependent Italian state — into the Russian sphere. While Italy is firmly in the Western camp and not for (outright) sale, it is certainly open to being “convinced” by lucrative energy deals to see things from the Russian perspective from time to time.

Italy, meanwhile, hopes that its close relationship with Moscow will yield greater energy security for Rome, as well as give Italian energy companies a hand in energy security of Europe as a whole. ENI is particularly desperate for cooperation with Russia because the Italian domestic natural gas production has withered down in the past 15 years while demand has risen. At home, ENI is also trying to fight off challenges from such energy upstarts as Edison, forcing it to look for closer deals with Gazprom to secure supplies. ENI is Gazprom’s top client for energy, paying over $10 billion for natural gas in 2008. ENI is even desperate enough for Gazprom supply that it has offered the Russian giant stakes in ENI’s upstream — foreign — production ventures such as those in Libya. For his part, Gazprom CEO Alexei Miller has established a cordial relationship with ENI’s chief, Scaroni.

However, due to the global financial crisis that is hitting Europe’s industrial output hard, Gazprom has had to slash its first quarter production by 15 percent. Just in February 2009, Gazprom’s output dropped 16 percent from a year earlier, lowering its entire 2009 gas export forecast from 170 billion to 140 billion cubic meters, a re-evaluation that will cost the energy giant some $18.8 billion in export revenue. This means that the 20 percent stock option for Gazprom Neft came at the worst possible time for Gazprom. In fact, the Russian energy giant, already in a lot of debt, has had to take loans with Russian state-owned banks VTB and Sberbank to make the deal possible. However, gaining control of the oil-producing company was vital for Russian natural gas giant Gazprom.”