Gazprom And BASF Cancel Deal Amid Russia Tensions

Gazprom And BASF Cancel Deal Amid Russia Tensions

The world’s largest chemical company by revenue, German-based BASF, announced on Friday that it was calling off its proposed asset swap deal with Russia’s OAO Gazprom given growing political tensions between Russia and the West.

“Due to the current difficult political environment, BASF and Gazprom have decided not to complete the asset swap planned for the end of the year,” a spokeswoman for BASF commented.

BASF noted it now anticipates an only “slightly higher” boost in earnings before interest and taxes in 2014, rather than the “considerable rise” the firm had forecast, as it won’t receive the income projected from the deal.

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More on the cancellation of the BASF – Gazprom deal

BASF was planning to divest itself of its gas trading and storage operations in holding company Wintershall AG through an asset exchange with Russian oil & gas conglomerate Gazprom. The trade was first announced back in November 2012, and would have given Wintershall entree to promising natural-gas fields in Siberia.

The asset swap between BASF and Gazprom had been behind schedule by several quarters, and BASF CEO Kurt Bock said in early December that the deal was still scheduled to be completed by the end of 2014. Earlier this fall, Bock called the proposed asset swap a “good and reasonable decision,” and noted the deal had been held up by technical issues and not political concerns.

Political tensions growing between Russia and the West

Russia has been at odds with the West since the Russian annexation of Ukraine’s Crimea region last spring. European and U.S. sanctions have begun to squeeze the Russian economy and isolated the country from the international community in recent months. German companies have also been pressured by the German government to minimize business ties with Russia.

Gazprom’s European operations are also under pressure. Russian President Vladimir Putin announced in early December that Gazprom was giving up on the South Stream pipeline project, which would have provided natural gas to Europe via Bulgaria. Work on the pipeline had been suspended after crisis in Ukraine and growing concerns that it could make Russia the dominant supplier of natural gas in Europe.

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