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Renault-Nissan leaders to meet amid tensions over Ghosn ouster

PARIS/BEIJING (Reuters) - Renault-Nissan executives will attempt this coming week to shield their joint operations from a looming power struggle between the carmakers, following alliance boss Carlos Ghosn’s shock arrest over misconduct allegations.

Top executives from both manufacturers and third partner Mitsubishi will attend mid-week operations committee meetings in Amsterdam that had been planned before Ghosn’s Nov. 19 detention in Japan, the companies confirmed.

“There is no change in our alliance relationship,” a Mitsubishi spokesman said.

While Nissan and 43.4 percent-owner Renault have vowed to safeguard the partnership, the Japanese carmaker’s Chief Executive Hiroto Saikawa also made clear he wants to end its French parent’s control of the alliance, as he moved swiftly to oust Ghosn as chairman.

Ghosn, 64, and alleged co-conspirator Greg Kelly, a fellow Nissan director, both deny accusations that they under-reported Ghosn’s compensation, misrepresented Nissan investments and made personal use of company funds, Japanese broadcaster NHK reported.

Renault has refrained from dismissing Ghosn as chairman and CEO, while demanding that Nissan share findings from the months-long internal investigation that led to his arrest. Ghosn’s duties have been delegated to second-in-command Thierry Bollore and board director Philippe Lagayette.

RIGHTS DISPUTE

Behind the scenes, fundamental differences have opened up over Renault’s rights under the alliance’s Restated Alliance Master Agreement (RAMA), sources familiar with the matter said.

Nissan, the larger partner by sales, has also revived a long-held ambition to force Renault to sell down its controlling stake.

On the eve of Ghosn’s Nov. 22 ouster from Nissan, Renault informed Saikawa and his board colleagues that it planned to appoint a fourth director under the terms of the 2002 founding pact, Reuters earlier reported.

In his formal response, the Nissan CEO insisted Renault had no right to make further appointments. The French company currently has three Nissan board members - including Ghosn, whose directorship can be revoked only by a shareholder meeting.

The number of Renault managers on Nissan’s executive committee might even be reduced, one company official told Reuters. “Discussions might include whether to let Renault keep its two positions,” he said.

The French government, Renault’s biggest shareholder, weighed in on Sunday. Finance Minister Bruno Le Maire said he was still waiting for evidence of wrongdoing by Ghosn - adding that a new audit would be carried out at Renault.

Efforts underway to secure and deepen the Renault-Nissan alliance must “respect the crossed shareholdings such as they are today,” the minister also told BFM TV. Nissan currently holds a reciprocal non-voting 15 percent stake in Renault.

INVESTOR PRESSURE

Saikawa’s independence struggle is already drawing support from investors keen to unlock the discounted value of Renault’s large holding in its Japanese affiliate.

“The relationship between Nissan and Renault needs to be rebalanced,” Evercore analyst Arndt Ellinghorst said on Sunday. “We urge Renault to sell down its stake in Nissan ... toward 25 percent (and) use the proceeds to buy back its own stock.”

At Nissan’s Thursday board meeting, Renault appointees also voted to eject Ghosn. They did so after reviewing 400 pages of internal findings, sources said - but are barred from sharing the information even with the French carmaker.

The Amsterdam gathering is likely to see Bollore and Saikawa meet face-to-face for the first time since Ghosn’s arrest, sources close to the companies said.

“These are purely operational sessions,” a Renault official said.

All three carmakers have stressed that operations and alliance business are proceeding as normal. Nissan, however, called off the launch of a high-performance Leaf electric car, cancelling Nov. 28 events in Yokohama and Amsterdam.

A Nissan spokesman gave no reason for the postponement and said the company had yet to set a new date for the announcement.

Washington wants to drive a wedge between the two countries as part of an effort to curb Tehran’s influence

The U.S. is pressuring Iraq to sever extensive energy ties to Iran, enlisting American companies and allies such as Saudi Arabia to develop alternatives and drive a commercial wedge between Baghdad and Tehran.

The push is part of a broader American effort to curb Iran’s influence in Iraq, where a 900-mile border, economic ties and Shiite Muslim majorities have created closer ties between the former enemies since the 2003 U.S. invasion. Despite its position as a major oil producer, Iraq relies on Iran for natural gas that generates as much as 45% of its electricity.

The U.S. wants to use sanctions on Iran to pry Iraq out of Tehran’s orbit but fears it could weaken the country, which is only just emerging from a three-year war against Islamic State. Too much pressure could also backfire by ultimately driving Iraq closer to Iran, officials and analysts say.

The U.S. granted Baghdad a 45-day exemption from Iranian sanctions, allowing it to keep importing natural gas. But American officials acknowledge Iraq will need more time to wean itself off Iran’s power supply. Iraqi officials expect the waiver to be extended, perhaps for years.

“This is a challenge for us,” said Raid Fehmi, a prominent Iraqi lawmaker. “If [the U.S.] puts too much pressure, it could destabilize us which could destabilize the region. The Americans don’t want that.”

U.S. energy companies are pitching Iraq on ways to meet its own energy needs. In recent months, several have signed deals or made proposals to help Iraq, including by capturing gas from the country’s oil fields and upgrading its shoddy power network.

Last week, representatives of Excelerate Energy LP, a Texas firm, traveled to Baghdad to propose a floating liquefied natural-gas facility for Iraq in a meeting that American diplomats helped arrange, said officials involved in the discussions. But Iraqi officials have been reluctant to accept the proposal because they feel it is driven by U.S. interests, they said.

An Excelerate spokeswoman said such a floating terminal “could provide benefits to Iraq” but it was company policy not to discuss commercial opportunities.

Earlier this year, Iraq signed a deal with U.S. energy company Orion Gas Processors LLC to process natural gas extracted at its giant Nahr Bin Omar oil field and transform it into usable fuels. U.S. officials have lobbied the Iraqi government to award General Electric Co. a multibillion-dollar contract that would enable Iraq to meet its energy needs.

The U.S. also has asked Iran’s rival Saudi Arabia to invest in power and other infrastructure in southern Iraq, an American official said. Saudi energy minister Khalid al-Falih traveled to Baghdad this month and met with his Iraqi counterpart to discuss strengthening cooperation in the fields of energy and electricity, and also met with Iraq’s prime minister, Adel Abdul-Mahdi.

Sanctions pose a difficult balancing act for Iraq between its most important foreign allies.

A behind-the-scenes political battle between Iran and the U.S. over who would lead Iraq after elections this spring resulted in a compromise. Mr. Abdul-Mahdi, who doesn’t support sanctions on Iran but is nonetheless working to comply, became Iraq’s prime minister last month.

“Iraq does not wish to become part of a struggle to which it is not party,” Mr. Abdul-Mahdi said in a recent news conference, likening his country’s position on the sanctions to that of Russia, China and Europe.

Iraq has been exploring ways to pay Iran for natural gas without violating U.S. sanctions on dollar transactions. Iraqi officials recently floated the idea of paying with food and humanitarian supplies.

Energy independence from Iran “was in Iraq’s interest before it became a demand from any other side,” said Kadhim al-Hassani, an economic adviser to Mr. Abdul-Mahdi who led a delegation that negotiated sanctions relief with the U.S. The sanctions “accelerated our steps.”

It could take over a year for Iraq to develop new ways of generating or importing natural gas, said Sara Vakhshouri, president of Washington-based consulting firm SVB Energy International. Iraq imports enough electricity from Iran to power almost 1 million homes a year and buys 28 million cubic meters of Iranian gas every day—roughly the amount that Massachusetts consumes daily.

Other changes have happened more quickly.

American pressure has prompted a resumption of exports of around 50,000 barrels a day of oil from the northern Iraqi city of Kirkuk, which the U.S. wants flowing to compensate for Iranian crude exports curtailed by sanctions. Exports from the area have been curtailed for the past year because of a political dispute between the Iraqi government and its autonomous Kurdish region, which controls the only export pipeline to Turkey.

Iraq was until recently trucking around 30,000 barrels a day to nearby Iranian refineries and Iran in return was delivering the same quantity of its own oil to Iraq’s southern ports for export—an arrangement that made transporting the crude more convenient for both sides. That swap was halted just before the new U.S. sanctions on Iran came into force on Nov. 5.

Iraq’s reliance on Iranian energy was starkly illustrated this summer when protests convulsed the southern city of Basra, after Iran cut supplies of electricity, which it also provides to Iraq, over unpaid bills.

“We support Iraq’s efforts to develop its energy sector,” an official at the U.S. Department of State said. “The protests in Basra over electricity shortages earlier this year highlight the need for Iraq to reach energy independence.”