Russia Secures Funding For Gas Pipeline To Germany

With building of the Nord Stream gas pipeline underway, Germany stands to gain substantial advantages by becoming the sole supplier of Russian gas to Central and Northern Europe. …

With building of the Nord Stream gas pipeline underway, Germany stands to gain substantial advantages by becoming the sole supplier of Russian gas to Central and Northern Europe. Along with considerable financial strength, some analysts believe that Germany’s growing interests, and role as a key importer of Russian goods, could set it at odds with its EU counterparts. See the following article from Global Intelligence Report for more on this.

SITUATION: Russia has succeeded in getting funding for the Nord Stream gas pipeline (formerly North European Gas Pipeline, NEGP), which will go under the Baltic Sea to Germany. It obtained environmental approvals from the littoral states concerned rather easily and earlier this year began to lay the pipes undersea.

ANALYSIS: The deal is another indicator of ever-growing German-Russian cooperation and reorientation of German diplomacy, even as this takes place against the interests of Germany’s EU partners.

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  • Russia obtained funding from European financial institutions with surprising ease. It was accomplished through Germany’s lobbying of the EU to include the pipeline as a “project of European interest” within one of the Trans-European Energy Network corridors. That designation was then regarded as a political seal of approval. Once it was accomplished, the littoral states of the Baltic Sea, through whose waters the pipeline must run, treated their national approval of the rights-of-way as a purely administrative issue and issued the requisite permits in due course.
  • The German companies BASF SE/Wintershall Holding GmbH and E.ON Ruhrgas originally held the remainder in equal shares but were forced by Gazprom (which refused to give up any pat of its majority 51% stake) to dilute their participation when they wanted to bring in two French firms. Now the two German firms each hold 15.5%, while Gasunie and GDF Suez each have a 9% share. The German metallurgical industry also gained from the deal, because only Germany possesses the industrial process technology and skilled labor necessary for manufacturing the pipes to the exacting technical specifications required.
  • In the winter months of January 2006 and March 2008, due to disputes between Gazprom and Naftohaz Ukrainy, Russia had decreased supplies to Ukraine, through which gas transits to Europe. The Nord Stream pipeline is designed to circumvent dependence upon Ukraine for transit of Russian gas to Europe. Also Germany is even using trying to use EU regulations to block Poland’s intended construction of a terminal for liquefied natural gas (from Qatar) that would be in competition with Russian gas resold by Germany.

BOTTOM LINE: What Germany gains economically from the deal (besides what former chancellor Gerhard Schroeder gained personally after jumping, literally weeks after leaving the country’s highest political office, to head the Shareholders Committee of Nord Stream, which his government had strongly supported) is to become sole supplier of Russian gas to Central and Northern Europe. There is, however, a deeper significance. Thus, for example, Germany plans to sell to Poland, from the west, the gas that it is accustomed to receive from Russia, to the east. Belarus would also be affected, in addition to Ukraine.

Germany and Russia have a long tradition of diplomatic cooperation, from the three partitions of Poland (late 18th century), through the coalitions against Napoleon (early 19th) and the Three Emperors’ League (late 19th), to the Rapallo Treaty (early 20th), to mention but a few of the more notable points. Even during the Cold War, the USSR had deep relations with East Germany, its Warsaw Pact and COMECON ally. The KGB service of current Russian Prime Minister Vladimir Putin in the German Democratic Republic is a living reminder of those relations.

Today Germany far outstrips other European countries as an importer of Russian goods, and occupies first place in foreign direct investment of capital in Russia, recalling the Tsarist period. Germany’s recent energy-industrial cooperation with Russia reaches back into the late Brezhnev era of the Soviet regime, but the present deepening of Germany’s special relationship with Russia accentuates the post-Cold War dynamics of international relations in Europe.

With the relocation of its capital eastward from Bonn to Berlin, the Federal Republic of Germany began to think, and has lately begun to act, more as a traditional Central European power, and less as the pillar of European integration that it was during the Cold War. This is also evident in the recent hesitation by German financial elites – and the outright refusal of the country’s political elites – to underwrite any bail-out for Greece or any other EU member, or indeed any assistance mechanism for the European debt crisis in general. The post-Cold War phase of Germany’s energy cooperation with Russia expresses that evolution.

This article has been republished from Global Intelligence Report. You can also view this article at Global Intelligence Report, a site focusing on breaking geopolitical intelligence, economic forecasting, trends and
world news.


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