Tuesday, January 08, 2008

A Pipe, A Chancellor, Security and the New President of Russia

Nord Stream is the extremely controversial plan to build an undersea gas pipeline from Russia to Germany. It is controversial for two different sets of reasons. One is concerned with the potential environmental damage of the pipeline on the already damaged and degraded waters of the enclosed Baltic Sea. The seabed of the Baltic is said to contain a large amount of different poisons in its sediments that would be stirred up by the construction. Such poisons included heavy metals, phosphate and other pollutants that have run off from the land, but also includes the remains of large numbers of mines that were laid during the first and second world war, which have not been fully mapped and have never been entirely cleared.

However it is not so much the environmental issues that have created the greatest controversy, it is the political issues. Firstly, the undersea route by passes the already existing pipelines between Russia and Western Europe- it avoids land transit through countries such as Poland and Belarus. Although one argument suggest that this saves running costs from transit fees, in fact the costs of construction and maintenance of an undersea pipe are substantially higher than any conceivable pipe over land. Furthermore, given the occasional cuts in supply, the Central and Eastern European transit states believe that the major purpose in by-passing them is to be able to use the threat to cut off supply for credibly- enforcing a de facto monopoly and raising prices beyond the global market level. More to the point, the new pipe would be able to supply the major Western European markets and increase their economic dependence on Russian gas supplies. Again, the CEE states believe that this would be to their considerable disadvantage, since Western European support for the East, in their periodic disputes with an authoritarian and assertive Russia might be much less forthcoming.

These concerns may not be baseless paranoia either.

Germany, which has been particularly courted by both Gazprom and the official Russian government, now has a series of public conflicts concerning how Russia has used its relations with key individuals. The first and growing scandal concerns Gerhard Schroeder, the one time Chancellor, who took the job of chairman of Nord Stream, and with it some extremely large financial arrangements. As Chancellor, Schroeder had championed the scheme and drawn a veil over the gathering gloom about Russian democracy. He and his wife, indeed had adopted Russian children from the Russian city of St. Petersburg, the home city of President Vladimir Putin- an exceptionally rare occurrence to gain official sanction. As a result, Mr. Schroeder seems to have become exceptionally loyal to Russia- trying to lobby Estonia to back down, for example during the Bronze statue crisis- a crisis to a very great degree of Russia's making. If Nord Stream was trying to allay the security fears of the countries between Russia and Germany, he could hardly have done a better job- at destroying confidence.

The fact that the Managing Director of Nord Stream, Matthias Warnig, has confirmed that he was an agent of the feared and hated East German secret police, the Stasi has only added to the atmosphere, not only of sleaze that surrounds the company, but of something far more sinister.

Now, the costs of the pipe are set to grow dramatically. First thought to be EUR 5 billion, now the construction cost is estimated to be EUR 8 billion, and some are even forecasting EUR 11 billion. These numbers would probably not be economic for a commercial organisation, but Gazprom, ever more increasingly, is not such an organisation but in fact a significant part of the Russian state. Certainly, in Sweden, there are growing concerns that a proposed platform, close to the coast of the Swedish island of Gotland, would be used to spy upon the Royal Swedish Navy. Indeed, Swedish legislators look increasingly set to refuse permission for the construction of any pipe in its zone of exclusive economic interests without major changes. Given that Latvia and Estonia already oppose the pipeline, it may be that Nord Stream will need radical changes- including spurs to the countries that it was intended to by-pass.

As costs escalate and the political heat is turned up on the project, it is interesting to note that the prospective new president of Russia, Dimitri Medvedev has been on the board of Nord Stream for several years, in his capacity as Head of Gazprom.

This is a wilfully divisive project- a Trojan Horse that will increase West European dependence on Russian gas supplies, but allow Russia to blackmail Eastern European customers with threats of cutting supply. It will create a Russian listening post in the middle of the Baltic Sea, compromising Swedish and NATO security. It has already created scandal at the heart of German politics. All of which the Siloviki at the heart of the Kremlin will regard as being well worth the extra costs already.

However, NATO should have forced major changes to the project, and indeed have been prepared to ensure that the project did not go ahead at all without major safeguards. Now, it is up to Sweden - and for all of our sakes, I hope that they play a much harder game than the subverted German establishment.

In the new cold war, one of the most important battle lines is money. The West must resist the blandishments and inducements- as Gerhard Schroeder seems to have so signally failed to do- and stand up for its own best interests.

This is a serious and significant battle- we shall see what the result will be in the Swedish Riksdag.


andyk said...

Actually 6-7 years ago the plan was to build the pipeline through Belarus and Poland. Except the Poles (or rather their politicians) threw up a big stink about imperialist Russia impinging on their sovereignty, using the fibreoptic cable that would have run along the pipeline to spy on Poland, etc.. So the Russians are damned if they do, damned if the don't. As any sane business would, Gazprom decided that they should deal with as few entities as possible. Who can blame them?

James said...

You've basically got this story just right - except that Alexander Medvedev is not related to Dmitri Medvedev, who is expected to become Russia's next president. Dmitri, however, is indeed chairman of the board of Gazprom.

Cicero said...

Thanks James- a slip of the keyboard, although in fact there is an Alexander Medvedev on the board of Nord Stream, it is Dmitri that I am refering to.