Strategic Analysis: Russian Business Activity in Albania (Abstract)

During the Soviet era, Albania was ruled for forty consecutive years by notorious dictator Enver Hoxha, who put the whole country into a sort of self-imposed exile after a falling-out with Soviet Premier Nikita Khrushchev. Financial and economic aid that had flowed into the country in support of infrastructure and technical needs ultimately came to a stop, and Albania moved out of the orbit of the Warsaw Pact and the Soviet-led Council for Mutual Economic Assistance (Comecon). In the present day, the result has been a far more modest footprint of Russian economic and financial interests in the country than in other countries in the region.

In 2013, for example, EU countries accounted for approximately 67.9% of imports and 64.6% of Albanias exports, whereas Russia was responsible for only 1.1% of Albanias imports and does not make the list of the countrys top ten export destinations. Russian entities have, however, pursued business there and the countrys years of endemic corruption and poverty creates an environment where this footprint is worthy of scrutiny.

The most strategic dimension of Albanias economic position is its emergence as the crossroads of a number of important energy pipelines either in development or these countries relationships with Russia. Most notable among these pipelines is the Trans Adriatic Pipeline (TAP), which will serve as the final leg of the Southern Gas Corridor pipeline project, whose overarching purpose (at least as originally configured) is to bring an alternative supply of non-Russian natural gas to Europe. Several other natural gas pipeline interconnectors could also be constructed across Albanian territory in order to bring Azeri gas from the TAP pipeline north into certain Western Balkan countries. The majority of these projects (with the exception of TAP), however, remain in their planning stages.

Amidst these major undertakings, Albania has produced sufficient quantities of natural gas to cover its domestic needs. In the past, this has protected the country from Russian supply disruptions and pricing pressures/extortion, permitting it greater freedom to pursue independent energy and foreign policy unmolested by Russian pressure tactics in this area. Interestingly, Albania is not even currently connected to an international gas grid and has. thus far. been bypassed by major proposed pipeline projects (both Western- and Russian-backed). This appears slated to change with profound implications for the country and the region.


Excerpted Deals & Transactions:

  • While the Albanian government has planned for years to privatize its national oil company, Albpetrol, it has suffered from several false starts. Efforts are presently underway to try again. Past efforts resulted in the asset being sold to a company of questionable background, owned by Albanian oil tycoon Rezart Taci, a notable figure in Albania. In March 2013 and in March 2015, Russias Ambassadors to Albania reiterated Gazproms interest in the Albpetrol privatization tender. During a speech at the 2015 Albanian Oil, Gas and Energy Summit, Prime Minister Edi Rama stated that 2015 would be the year the company finally becomes privatized.
  • Beginning on December 8, 2014, Russias Rosselkhoznadzor implemented a temporary embargo against Albanian fruits and vegetables, claiming that the Albanian products were coming from other EU countries and that their labels had been falsified. Although Albania and Russia have minimal direct commercial relations, the Russian embassy in Albania stated that 80% of wheat and flour sold in the country is sourced from Russia, a potential strategic vulnerability.
  • In August 2015, Russian Prime Minister Dmitry Medvedev announced that the Kremlin would be expanding its embargo against Western food products (which includes meat, fish, dairy products, fruit and vegetables) to several EU ally countries, including Albania (along with Iceland, Liechtenstein and Montenegro). The countries were specifically targeted for their backing of EU sanctions against Russia, unlike Macedonia and Serbia that have refused to be party to the EU sanctions regime.
  • Rezart Taci, an Albanian oil tycoon, has been described as part of the inner circle of former Prime Minister Sali Berisha and has been present in numerous privatizations and strategic infrastructure projects, including the purchase of state-owned Albanian Refining and Marketing of Oil (ARMO) and the near acquisition of Albpetrol. A number of these arrangements have been suspect. Taci, who also holds stakes in various financial and media enterprises, has also been accused of being behind the Russian-Cypriot conglomerate that became the owner of Italian football team Parma.