Global Issues: Austria & Czech Republic/Politics of Oil

This chapter on the politics of oil takes an in depth focus on the oil industry in Austria and the Czech Republic. Every large organization deals with politics, in essence politics is about governing and managing resources. In dealing with the world’s most demanded resource, oil it can be expected that the politics that surround it will be complex, far reaching, and most of all relate to you the reader. In studying the politics of oil in these two countries my original assumptions were quickly overturned. The original assumption would be that the politics of oil would be local issues, but I quickly discovered that while local issues do have a place in the research and discussion, regional, and even transnational issues will take precedent in the preceding sections.

Politics of Oil: The Top Companies That Deal With Oil Everyday

When the delivery truck fills up the tank in Vienna or the taxi is pumping petrol in Prague, it is more likely than not they are not thinking about the complex politics that go into getting the gas from the ground to the pump. This is where Mr. Helmut Langanger comes into the scene in Austria, and he is the man who helps make that almost mystical transition from the ground to the pump work so well. Mr. Langanger. is in charge of exploration for the largest oil company in Austria, OMV. . His leadership in exploring and then drilling for oil in Austria has helped place Austria in a somewhat comfortable energy position. In 2003 the largest discovery was made by his team when a well was found, containing 500,000 tons of crude oil. (Christian, 2005) While OMV dominates holds the lions share of the market in Austria, the same cannot be said of Austria’s close neighbor, the Czech Republic.

The Ceska Rafinerska is the largest oil refiner in the Czech Republic and in early 2010 has become the center of oil politics in the Czech Republic. The largest oil company in the world, Shell, is looking to sell their share of the company to a buyer for around $200 million. There are numerous buyers vying for the purchase but nobody has reached the set price yet. Many entities have become involved in this engagement, ranging from the Czech government to Russian diplomats. The company, Mero has their sights set on acquiring the refinery in order to expand their control on the energy industry in the Czech Republic. Mero already has the market share on transporting oil throughout the country and acquiring the company would be a strategic benefit, however inside sources close to the negotiations state that their initial offer fell far below what was being asked for. (Frantova, 2010)

The Politics of Paying: How Austria And Czech Republic Pay for Oil

The Czech Republic, like many countries tax oil as a way to raise funds to run the country. The most recent statistics show that there are various taxes built into the cost of a liter of oil in the country. This includes the value added tax and the consumer tax.(PetroPlaza, 2010) Across the border in Austria there is a growing debate over the oil tax. Should the country use toll roads or move to a robust fuel tax? Organizations that support toll roads suggest that it would have economic benefits; such as lowering inflation for the Austrian economy and attracting those seeking “cheap gas” from across the border. (Austrian Times, 2010)

The Politics of the Grid: Russia’s Role on it

Transporting oil from the ground to the tank is no simple task and international politics can sometimes stop the transition. The events that took place between the United States, Czech Republic, and Russia represent how divisive oil can be on the world stage. In the summer of 2008, the United States signed an agreement with the Czech Republic that would place a radar in the country. The radar, which is linked to the larger Anti-Ballistic Missile Program run by the United States Department of Defense combats Intercontinental Ballistic Missile threats. This event caused diplomatic relations between Russia and the other countries to remain shaky for a few weeks. Days after this agreement was signed Russia cut the flow of oil into the Czech Republic. Russian leaders publicly stated that how furious they were over the proceedings and vowed to take action. The Czech Republic had keenly predicted such tension over oil years before when they built a massive pipeline on the other side of the country extending from Germany. (Kramer 2008)

Austria’s largest oil company, OMV for years have been working to access the precious oil flowing from Russia. Austria and Slovakia at the same time also had their sights set on the Druzhba Pipeline. The aged pipeline dates from the Communist Era and was constructed to bring the crude supply to countries under Soviet control. The problem that all parties are facing is there is a gap in the pipeline grid and the gap needs to be filled to help prevent stoppages of flow and increase the availability of supply for Austria and Slovakia. The project is in its second phase after the Slovakian company declared bankruptcy. New life was breathed into the project when the Slovakian government bought back a stake in the company. This is a great example of how expensive it is to build pipelines through other countries. It takes cooperation and determination to see a project too success. (Energy Business Review 2009)

The Politics of the Oil Pipeline: How Nations can Rise and Fall from Them.

It was March 1960, in Bratslavia, Slovakia when an oil pipeline began leaked and severely damaged a critical water reservoir that supplied the city drinking water. The first step taken on this multi-layered oil pipeline construction plan was to build a pipeline between an Austrian refinery and the Slovnaft refinery. This brought immediate condemnation from Slovakian citizens who want to protect the environment. The concern is that the projected development of the pipeline will travel directly over a precious water source. concern.(Spectactor March 2010)

While the prior environmental damage remained on the front of many Slovakian minds, it was in the national interest of their country and Austria to continue with the project especially in light of the memrandum of understanding that the two countries leaders signed committing them to strong energy policies while assisting the other. The “Bratslava-Schwechat-Pipeline” has become the final design for this pipeline. As this project is completed it will be the first time that crude oil will be pumped directly from Russia. While Austria waits for Sloavkia to sort out technical issues, Slovakia must weigh the pros and cons of the project. The positive aspects of developing a more robust network of pipelines throughout central and eastern Europe can help them become more secure. In early 2009, Russia cut off gas to areas of Europe when a disagreement with Ukraine went bad. Therefore to prevent a “Ukraine Incident” it could be advantageous to develop oil that is less connected from Russia. . ( Spectator March 2010)

The Politics of Consolidation: Why Oil Companies are Merging

In April of this year, 2010 Mobil Oil Austria merged with Agip Austria which is controlled by a company that goes by ENI, which is based in Italy. The European Union Commission dealing with matters like these had to agree to accept the accquistion because of the numerous countries involved in the deal. ENI deals mainly with natural gas exporation but has its hands in oil exploration as well. While many of these companies may sound unfamiliar if you are outside of Europe, Mobil Oil Austria which is the key company in the figure is owned by the ExxonMobil Holding Company based in Germany. (EU approves acquisition of Mobil Oil Austria by ENI)

In the Czech Republic there is a transnational oil company. It is the Czech Republic Resource Corporation. The company in Spring of 2010 has signed a deal with a Texas oil company that commits to working with them in the field. This is not strategic business move but a financial one that will allow a new Czech oil company to leverage itself in the competitive market. It has an office in Prague and one located in Texas. (Stock Market Weekly)

The politics of Oil in Austria and the Czech Republic and the wider Eastern European market are complex, there is no debate about that. But hopefully the point has been brought to the reader that the politics of oil involve leverage and resources. Austria may use leverage to help Slovakia against Russia. OMV may use its vast network through Austria to put up a bid when the next opportunity comes to acquire a smaller company. Oil companies and states seem to have a symbiotic relationship, and that has been a unique facet of this brief look at these two countries “spheres of oil.” Austria and the Czech Republic are great examples of the symbiotic relationship that makes of the politics of oil.