Since the start of 2007, the amount of talk on the political grapevine concerning Gazprom and its UK ambitions appears to have risen several notches. The state-owned Russian gas giant’s interest in Centrica, the parent company of British Gas, is long-standing and well documented. It is said, however, that Gazprom may be considering switching its attentions to National Grid, the owner of Britain’s gas and electricity transmission networks. A tilt at National Grid would be in a different league altogether from a takeover of Centrica. It would probably cost the Russians £35bn, including the £10bn of debt on National Grid’s books, but Gazprom is one of the few companies that could swallow such a large mouthful without getting indigestion. It would also be a logical fit. Gazprom has made no secret of its desire to buy European energy distribution assets, partly as a hedge against its volatile gas production business and partly to secure better access to markets outside Russia. In that respect, the UK is one of the few countries genuinely open to a foreign investor. It would also position the Russians to supply the European market from the west as well as the east. National Grid is the majority shareholder in the huge Isle of Grain liquefied natural gas import terminal. In a couple of years’ time, the UK will have more gas storage and import capacity than it has demand for gas, making it an attractive base for exports to the Continent. The track record of the National Grid management suggests they would be open to a bid at the right price. The chairman, Sir John Parker, has sold every large company he has run most recently flogging P&O to the government of Dubai while the new chief executive Steve Holliday is a graduate of the Exxon-Mobil “everything has its price” school of business. The political terrain is less certain. Whereas a Gazprom bid for Centrica would raise major competition concerns by pairing the world’s biggest gas producer with the UK’s dominant gas supplier, a Gazprom/Grid tie-up would pose few obvious complications. It would, however, raise serious questions concerning the UK national interest. The Government surrendered its golden share in National Grid some years ago so it could not automatically block a bid from Gazprom, or another suitor such as a private-equity consortium. But there are provisions in the Enterprise Act which would allow it to refer any takeover on national interest grounds. The idea of Britain’s energy grids being owned by what is in effect an arm of the Kremlin would surely fit the bill. There would also be problems in the US, where Gazprom would almost certainly not be allowed to retain ownership of the three big American energy companies National Grid has acquired over the years NEES, Niagra Mohawk and Keyspan. The thought of a national asset like the Grid falling into foreign hands would have seemed intolerable not so long ago. But that was before the ownership of Britain’s airports and ports went overseas. Even now, the idea that the Russian state would be allowed to take over a strategic asset such as the UK’s gas and electricity networks sounds fantastical.

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