Fly in the Borscht Ex-Chancellor Schröder's Russia Ties a Problem for the SPD

Former German Chancellor Gerhard Schröder is soon to join the supervisory board of Russia's largest oil company, Rosneft. His ties in Moscow are becoming a problem for Social Democratic chancellor candidate Martin Schulz on the campaign trail. By SPIEGEL Staff
Former German Chancellor Gerhard Schröder together with SPD chancellor candidate Martin Schulz

Former German Chancellor Gerhard Schröder together with SPD chancellor candidate Martin Schulz

Foto: Jonas Güttler/ dpa

It was just a brief discussion, and it wasn't particularly pleasant. Last Tuesday, in the midst of the tumult of the campaign, Social Democratic Party (SPD) chancellor candidate Martin Schulz grabbed the phone to call former SPD leader Gerhard Schröder -- the last politician with the party to have succeeded in becoming German chancellor.

A short time before the call, Schröder had confirmed to Schulz that news reports about his intention to join the supervisory board of Rosneft, Russia's largest oil company that is majority state-owned, were true. After a night of thought, Schulz now wanted to tell his prominent party ally what he thought of the idea: namely, not much. "I think it's wrong," Schulz told Schröder, who was in China at the time of the call. "You don't have to take every job that comes along."

Schulz isn't having an easy time of it these days. For weeks , his party has been well behind the conservatives in public opinion surveys with just over one month to go until Germans go to the polls to elect a new parliament. The last thing Schulz needed was a blow delivered by someone in his own party. Now, though, Schröder's intention to take on an additional job in the Russian state company - one that will pay him $500,000 per year - has presented the SPD with a fundamental question: Is it time for the party to distance itself from its former leader? And if so, how far?

The news could hardly have been worse for Schulz. Just six weeks ago, Schröder was cheered wildly at the SPD convention when he assured gathered delegates that they could still "become the strongest party" this fall. Now, however, the man who the party had hoped would help them in the campaign has become a millstone around their necks.

Schröder's position at the Nord Stream pipeline consortium, which he joined soon after his election loss to Chancellor Angela Merkel in 2005, had already put his party in a tough spot. The fact that he now intends to become a key executive for Rosneft is making the situation even worse. The company, after all, isn't just another of the many companies that belongs to the Kremlin. It is right at the heart of Russian power and does business with the likes of Syrian autocrat Bashar Assad and provides loans to leaders like Venezuelan President Nicolás Maduro. If Schröder takes the job as he has said he will, he wouldn't just become an executive at the mercy of Moscow, he would become a member of Russia's senior-most decision-making circles and would be even closer to Russian President Vladimir Putin than he is today.

Faltering Campaign

From such a perch, would the former SPD leader use his party to further the Kremlin's interests? That is the question that many are currently asking - and it is the last thing that Schulz needed in his already faltering campaign. It has distracted from the debate over social justice that the Social Democrats had hoped to start in this campaign. It is also wasting time the party doesn't have. And it is wind in the sails of all those voters who believe that politics is ultimately exclusively for the benefit of the politicians themselves. Schröder's job provides "several targets for attack, not least given the ongoing Ukraine crisis," says Gesine Schwan, who was once a candidate for the German presidency for the SPD. Many party members wonder why Schröder chose to announce the news now, of all times. "Six weeks before the election? How can that be?" says one.

But the party itself knows the answer. Schröder is Schröder - and he is unpredictable.

Having managed to work his way from the very bottom to the very top, Schröder had always been fascinated by the world of money and influence. As a result of a childhood in poverty, Schröder fell in love with symbols of wealth, such as his expensive cigars, pricey red wines and Brioni suits.

At the same time, Schröder was a provocative politician who didn't shy away from conflict and enjoyed breaking taboos. As SPD chancellor, he made deep cuts to the social welfare system and kept Germany out of the Iraq War against the will of the United States. After he was voted out of office in 2005, he wasted no time in taking a position with Gazprom, a move which he saw as an act of rebellion. There was nothing illegal about the move. But it was in poor taste, particularly since Schröder, as chancellor, had made decisions that were beneficial to the company.

Schröder never wanted to be a wise, solemn and all-knowing elder statesman in the mold of Helmut Schmidt. He even hated the title "Ex-Chancellor" because to him it sounded like "half dead." Instead, he wanted to do big business deals after he lost political power -- or at least pave the way for them.

Schröder has long been involved with the Nord Stream pipeline. Now, he has agreed to join the board of Rosneft.

Schröder has long been involved with the Nord Stream pipeline. Now, he has agreed to join the board of Rosneft.

Foto: Bloomberg / Getty Images

Indeed, Schröder is believed to have been influential in the sale of several run-down shipyards in Wismar and Rostock a few years ago to Russian businessman Vitaly Yusufov, who heads up the Nord Stream offices in Moscow. Yusufov, who was 29 at the time, had been responsible for taking minutes whenever Schröder met with Gazprom CEO Alexey Miller at company headquarters. He paid 46 million euros for the shipbuilding companies before selling them again in 2016 - for more than 230 million euros. The sale price was more than five times what he originally paid - not a bad deal.

A 'Man with Stamina'

Schröder's own involvement in Nord Stream also proved successful, at least for the companies involved from Germany and Russia. Soon, roughly 60 percent of the natural gas used in Germany was flowing through pipelines belonging to the consortium, despite significant European opposition to the pipeline from the Italian government and from almost all Eastern European EU member states.

But the ex-chancellor proved adept at stymieing the growing criticism of the project. He would meet with German politicians at high-end restaurants in Berlin and seek favor in Brussels with European Commission President Jean-Claude Juncker or the relevant commissioner, Arias Cañete.

Most importantly, though, he was able to secure German government support, in part with the help of his former political allies from the SPD. "Nord Stream lies in Germany's interests," Sigmar Gabriel, who headed the SPD until early this year, was fond of saying during his tenure as economics minister. "On that issue, I agree with the German chancellor."

It's little wonder, then, that Putin has been courting Schröder since then and praised him as a "man with stamina." As a real man who isn't bothered by much, including widespread criticism of his close friendship with the Russian president.

As such, Schröder's most recent promotion hasn't surprised anyone. Just in May, the former chancellor joined Rosneft head Igor Sechin for the grand opening of a new company branch in the heart of Berlin. There were kisses and hugs for the business partner and oysters for the guests.

The Darth Vader of Moscow

"It was easy to see at the occasion how tight the relationship is," says a person who was present at the event. Rosneft is interested in jumping into the German refinery and service station market and plans to invest around 600 million euros in Germany in the coming years, part of which is earmarked for the planned Druzhba ("Friendship") oil pipeline in southern Germany.

Schröder is to help by making his global network of political contacts available to company head Sechin, who is considered the second-most powerful person in Russia behind Putin. He is one of the most important members of the so-called Silovik network, which rose to power in the country along with the former KGB agent Putin.

Sechin has a reputation for being ruthless and is referred to in Moscow as Darth Vader, the "prince of darkness" from "Star Wars." He turned Rosneft into the largest publicly traded oil producer in the world by absorbing the most important parts of the Yukos concern. The company empire belonging to the former oligarch Mikhail Khodorkovsky had become affordable after its owner was imprisoned and his property seized.

Most recently, Sechin found himself in the headlines due to accusations of involvement in a clever plan to push former Economics Minister Alexey Ulyukaev out of office. Ulyukaev had dared to question a multibillion-dollar deal made by Rosneft.

Even among German industry leaders, Schröder's involvement with a businessman of such dubious credentials is considered a mistake. Schröder is doing himself no favors, they say, by tying himself to a company that is that intertwined with politics. It will be a significant blow to his reputation in Germany.

Problematic Ties

Many SPD members are also dismayed. Members of the party's leadership know full well that Schröder's questionable connection to the Kremlin will reflect poorly on the SPD if the party doesn't distance itself from the former chancellor. At the same time, though, the SPD fears that an open break could hurt the party more than it would help.

Early last week, Schulz tried to bridge the gap by saying that he would never follow Schröder's example, but adding that it was "Schröder's private business." Schulz said that he would have nothing more to say on the matter at this time. The statement has the advantage that Schulz will still be able to look Schröder in the eye. But it opens him up to criticism that he hasn't condemned Schröder's problematic ties with Putin clearly enough.

Conservative politicians have been quick to pounce. In an interview published on Monday in the mass-circulation Bild newspaper, Chancellor Angela Merkel said she felt that it was "not acceptable," especially given that Rosneft is one of the companies included in EU sanctions relating to Russia's illegal incursion into Ukraine, for Schröder to take the job.

Meanwhile, Norbert Röttgen, a foreign policy expert for Merkel's Christian Democrats, for example, has accused Schulz of "weak leadership" on the Schröder issue. Manfred Weber, meanwhile, floor leader for the conservative European People's Party in the European Parliament and a member of the Christian Social Union, the Bavarian sister party to the CDU, has likewise been vocal in his critique of Schulz. Schröder's involvement, he says, should "make clear even to the last skeptics that Nord Stream and Rosneft aren't simply business ventures, but are companies doing political work on the Kremlin's behalf."


The article you are reading originally appeared in German in issue 34/2017 (August 19th, 2017) of DER SPIEGEL.

Günter Krings (CDU), the parliamentary state secretary in the Interior Ministry, says: "No waiting period can be long enough to justify becoming involved in Putin's repugnant system. Such offers should simply be turned down."

SPD members, though, have shied away from criticizing their erstwhile leader. SPD foreign policy expert Dagmar Freitag says she believes "it is a good thing in these difficult times if someone still has a reliable connection to Putin." But, she continues, you "certainly don't have to take an additional job in one of the most important state-owned companies in Russia."

Schröder on the Campaign Trail

The clearest criticism of Schröder comes from SPD politician Gesine Schwan. "I can't understand it at all," says Schwan, who Schröder once named as the Social Democratic candidate for German president. "I really wish he wouldn't take on this assignment." For ethical reasons, it is "always problematic for politicians to switch to the business world after their career," Schwan says. "Even his position at Nord Stream was a questionable use of political power."

She is also open about the dilemma her party now faces. "We can't simply disown him," Schwan says. "That would be like erasing a part of one's own past. That never works."

In the intervening days, Schulz has intensified his criticism of Schröder's business activities in Russia. The SPD head realizes that Schröder has put him in an impossible position. But the ex-chancellor has also made life difficult for other Social Democrats, such as Foreign Minister Sigmar Gabriel. Just a few weeks ago, Gabriel met with Schröder and Putin for dinner at the Russian President's residence on the Baltic Sea. Can Gabriel continue to take such free advantage of Schröder's Moscow contacts?

SPD candidates for German parliament who have planned campaign appearances with Schröder now also find themselves in an uncomfortable position. At the end of August, Schröder is scheduled to appear with parliamentarian Lars Klingbeil in the town of Rotenburg in Lower Saxony. A short time later, he will appear with former SPD General Secretary Yasmin Fahimi in Hannover. If they cancel their appearances with Schröder, it threatens to amplify the debate. But if Schröder appears as planned, his Rosneft job threatens to overshadow everything.

SPD candidate Klingbeil, for his part, isn't concerned. "I'm looking forward to his visit," he says. "We will talk about everything."

By Melanie Amann, Christina Hebel, Gunter Latsch, Veit Medick, Peter Müller and Michael Sauga

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