From Russia With Love

[Ryan Ruck]

From Russia With Love

Vladimir Putin visited Berlin yesterday to give his old friend Gerhard Schröder a boost during the last days of an election battle -- and to sign a deal for a new gas pipeline that leaves Poland out in the cold.

Gerhard Schröder and Vladimir Putin have always been pals. Putin, for one thing, speaks fluent German (he used to run a KGB bureau in Dresden). Russia also sells a lion's share of oil and natural gas to Germany; and it's just good politics for the German chancellor to be seen smiling and shaking hands with the Russian president, papering over a bad century of German-Russian relations. So it was no surprise when Vladimir dropped in on Gerhard this week -- during an election campaign -- to cinch a deal for a new natural gas pipeline from Russia's Baltic coast to Germany.

One problem, though: the pipe will run along the ocean floor. In the old days, pipelines from Russia to East Germany were built overland during (or just after) the Cold War, as a sign of friendship within the Communist bloc. Those days are apparently gone. The new undersea gas line will skip Poland and Ukraine and Belarus -- along with the land rent and transit fees those nations might normally charge. Poland, for one, is howling, and Germany's newspapers sympathize.

"Schröder's commitment to the Baltic-Sea route is above all a favor to his friend Vladimir Putin," writes the Financial Times Deutschland, which points out that the economics don't make a sense. "The overland route through the Baltics would have been cheaper, as managers for participating [German] firms Eon and BASF well know." The paper doesn't see much political risk in running a pipe through westernizing nations like Ukraine or Poland, and thinks they have a right to feel snubbed. "The pipeline contract signed yesterday in Berlin is being called the 'Schröder-Putin Pact' in the Polish media," the editors note -- "a bitter play on the 'Hitler-Stalin Pact' of 1939 that led to the carving up of Poland."

The left-leaning Berliner Zeitung punctures Schröder's inflatable love for Putin by listing signs of dictatorship in Moscow which the German leader prefers to ignore. "He had nothing to say about the election farce in Chechnya, even after the EU condemned it; he rightly alienated George Bush for the war in Iraq but threw in with Putin, who's waged a dirty war in his own nation; he even called Putin a 'flawless democrat' even after [business tycoon and political opponent Mikhail] Khodorkovsky was sidelined in an election." The paper plays on Putin's past by describing his government system in Russia as a hypothetical East Germany "taken over by the secret police after the fall of Communism."

The only newspaper to mention the pipeline's environmental impact is the left-liberal Tageszeitung, which also sounds underwhelmed by Schröder's new agreement. Not only will the pipeline irritate Poland, writes the paper; it's also an ecological pain in the rear. "A rupture on land can be located fairly quickly, but pipeline damage underwater might go undiscovered for days."

The center-left Süddeutsche Zeitung argues that the dream of cheap natural gas, which will be important in future generations if the price of oil keeps rising, is a fallacy. Natural gas comes cheaper than heating oil, traditionally, but Russia's gas monopoly, Gazprom, keeps prices high for European export. And Gazprom is one of the most important natural-gas providers in the world. "It's unrealistic for certain German politicians to think they can convince Russia to unlink the price of natural gas from the price of oil," writes the SZ. By "certain politicians" the paper means not just Schröder, but also his opponent Angela Merkel, who also met Putin on his swing through town.

Die Welt believes Germany needs alternatives to oil from the Middle East, but worries the pipeline might make Berlin too dependent on Moscow. (Germany already buys about a third of its natural gas from Russia.) The center-right paper faults Schröder for "fluttering his eyelashes" at Putin and shamelessly cutting Poland, in particular, out of the massive trade between Siberia's gas fields and the European Union. "A new German leadership will have to work hard to smooth the Poles' ruffled feathers," write the editors. "But it will have to be done, for our interests as well as theirs."

[Ryan Ruck]

Baltic Gas Pipeline: Moscow Turns The Tables

Stable supply of energy to Europe in the next few decades will depend on relations with Russia.

This is the principal message from British Energy Minister Malcolm Wicks who visited Moscow recently. It is no coincidence that such a blunt statement follows the Russian-German agreement to build the North European gas pipeline (NEGP).

Signed by Vladimir Putin and Gerhard Schroeder on September 8 in Berlin, the agreement between Gazprom and Germany's BASF and E.ON was perhaps the key geopolitical event of the past few months. At any rate, it has provoked a strong response throughout Europe. The new line will pass under the Baltic Sea and ship Russian gas direct to Germany, bypassing Eastern Europe, relations with which leave much to be desired. There will also be feeder lines to Sweden, Finland and the Kaliningrad region. It is a real breakthrough for Russia both in energy and political terms.

The agreement is clearly beneficial for Russia. In expert opinion, the first year of operation will bring it $4 billion in earnings, in addition to cuts in transit fees which in Ukraine alone amount to 20% (13% is payment for transit and 7% expenses to maintain pipeline pressure). Minus transit costs and pumping losses in Belarus and Poland.

More importantly, several other countries can join the pipeline, first of all Britain, the Netherlands and Denmark. Branches are contemplated to Scandinavia. The project is feasible and offers Russia not only financial, but also geo-economic advantages in increasing its energy presence in Europe. As the British minister said, the EU must have international deliveries in order to have a functioning domestic energy market, which, he said, can be achieved through cooperation with such strategic energy partners as Russia. Britain has common interests with Russia, which supplies 50% of Europe's gas, said Wicks.

The agreement is also to Germany's advantage. Apart from political dividends for Schroeder and his team, German companies will for the first time gain access to Russian gas fields supplying the line. Also, Germany will transit an additional 55 billion cubic meters of Russian gas to Western Europe.

The scheme likewise has its list of "casualties" - Russia's east European and Baltic neighbors. The potential threat of losing transit fees and getting reduced gas deliveries has soured relations between Germany and Poland. Officials in Latvia and Lithuania have criticized not only the NEGP agreement, but also Germany's stand, as well as Brussels' disregard for the interests of "minor" European nations.

The European Commission, which only recently rejected the plans of Polish Prime Minister Marek Belka for an Amber gas pipeline across Poland, Ukraine, Latvia and Lithuania, approved the Russian-German agreement almost overnight. "We welcome any infrastructure helping to supply gas to EU countries," Rupert Krietemeyer, a spokesman for the European Commission, told a news conference in Brussels.

Hence stinging political labels: Polish President Alexander Kwasniewski described the NEGP agreement as the Schroeder-Putin Pact, which evoked predictable associations in the Baltics, where the agreement is seen as a gas version of the Molotov-Ribbentrop Pact. "With German support, Russia can rule over large territories and split them as it sees fit. Knowing what is on the minds of Russian policy planners, no one can doubt that the so-called economic union between Russia and Germany will be a political alliance," said Vytautas Landsbergis, a member of European parliament, and ex-chairman of Lithuania's parliament.

Indeed, as the British Guardian wrote on September 8, the Russian-German project can alter the geo-political situation in Europe, a process we are witnessing already. The failure of the East European appeals to Brussels is due partly to the political instability in some of these countries, as demonstrated by recent events in Ukraine. With world energy markets becoming increasingly unpredictable, such a reliable partner as Russia is preferable.

[Ryan Ruck]

Russo-German Pipeline Deal Raises Tension

Russia and Germany are on the verge of signing a multibillion pound pipeline deal that has the potential to alter Europe's political landscape and seriously aggravate the Kremlin's relations with its former Soviet neighbours. The Russian gas monopoly Gazprom is expected to ink the deal tomorrow to build a pipeline under the Baltic sea that will bring vast supplies of gas to western Europe.

The Russian president, Vladimir Putin, will endorse the deal with German chemicals manufacturer BASF as he visits the German chancellor, Gerhard Schröder.

The north European gas pipeline will allow Russia to bypass "unfriendly" states such as Ukraine and Poland. "It will help us avoid all the complications with those countries and deal directly with the Germans," said Alexei Makarkin, an analyst at the Centre for Political Technologies in Moscow.

Oil and gas deals have emerged as a key tool in foreign relations as the Kremlin seeks to expand into European energy markets. About a quarter of Europe's gas is provided by Russia. The pipeline will carry gas 600 miles under the Baltic sea to the German port of Greifswald and from there to other countries, including Britain. It is expected to come on stream by 2010.

The Polish president, Alexander Kwasniewski, spoke out against the project yesterday, saying the deal had been struck "over our heads".

He added: "From the point of view of the European Union ... of common EU policy toward Russia, it is not a good situation if one EU member, an important country, Germany, conducts such a policy over our heads and over EU heads."

Relations between Moscow and Warsaw sank to a new low last month after a series of beatings of diplomats and their families in the two capitals.

Analysts say the pipeline is a sign of the Kremlin's desire to punish neighbours that it believes are trying to forge a rival power base. Mr Makarkin said it would be a blow to "countries which are attempting to create an alternative centre of influence on the post-Soviet territory".

Russia and Ukraine have been at daggers drawn since the "orange revolution" that swept Viktor Yushchenko to power last year. Mr Yushchenko angered the Kremlin further when he joined forces with the Georgian president, Mikhail Saakashvili, to announce a new pro-democratic alliance.

Moscow and Kiev have clashed repeatedly over transit of gas supplies. Gazprom is threatening to triple the price Kiev pays for its supplies. Ukraine said last week that it could retaliate by quadrupling transit tariffs.

Vladimir Zharikhin, of the Institute of CIS studies, said Russia's former Soviet neighbours no longer had a right to expect its patronage.