This is the general view of a Europe whose winters are silently and patiently borne by the citizens, reassured by the continuing warmth of their homes guaranteed by the various utilities. But this year there is reason for some of them to be worried. Ever since the Russian natural gas giant Gazprom announced its ambitious new pipeline to run along the bed of the Baltic Sea, the dividing line between Eastern and Western Europe has assumed even more rigid political hues.
The new NordStream pipeline will replace the current system, whereby Russian gas has to be piped through Eastern Europe to reach Western Europe, by travelling more than 1,200 kilometres underwater, from Vyborg, Russia, to Greifswald, Germany, bypassing the former Soviet and satellite states. This Russian-German pipeline will ensure a separate supply route which, while theoretically providing equal benefits to the whole of Europe, has raised the spectre among the Central and Eastern European states of gas-leveraged Russian domination of the erstwhile Soviet bloc.
It is true that if Russia shuts off the gas to pressure a neighbour in the east, the repercussions are likely to be felt among the more powerful, wealthier countries to the west, touching off loud protests as happened last January when Russia shut down a pipeline that crossed Ukraine, ostensibly over a dispute with Ukraine on pricing and tariffs. This shutdown left hundreds of homes in southeastern Europe without heat and shuttered hundreds of factories for nearly a month. The woes of Eastern Europe will be further compounded when a similar project in southern Europe called SouthStream, to run under the Black Sea, insulates Western Europe from such actions and limits the political and financial costs to Russia.
Over to Gazprom. This Russian giant, which supplies Europe with 28 per cent of its natural gas, on the other hand, presents a face of wounded pride and defends itself by asserting that the $10.7 billion project is simply a commercial enterprise like any other, charged with maximising its efficiency and profits, and that Eastern Europe’s fears were unfounded. The wall broke down 20 years ago, goes the line.
European officials have portrayed the project as one that would unify Europe and enhance its collective security. The European Commission and European Parliament endorsed the pipeline as early as 2000 and both reconfirmed their commitments as recently as 2005.But take a closer look at Gazprom. West Europeans, and in particular, the Germans, have bought into the myth that Gazprom is a normal commercial concern out to succeed in the marketplace. And the European Union has pretended to behave in an even-handed way during the Russian-Ukraine row over gas prices. The bureaucrats in Brussels were in sympathy with the Gazprom line, saying that Ukraine was chaotically governed. The EU is now co-operating with Gazprom in building the Baltic pipeline.
The fact is that Gazprom is not a market player. It’s a political weapon. It could have easily entered into serious talks with troubled Eastern Europeans about long-term supply contracts rather than engage in annual pricing wrangles. It disrupted supplies after the revolutions in Ukraine and Georgia while lowering gas tariffs to friendly states such as Belarus and Armenia. Three days after the Czechs signed a missile defence pact with the US, Russian oil flow dropped by 40 per cent.
If the EU is serious about energy security it has to diversify away from Russian supplies soon. It should also demand more transparency from Gazprom. The Germans are well placed to do this as E.ON, the German energy giant, has a 6 per cent stake in Gazprom, enough to make Gazprom think twice before acting politically. And as long as Germany’s supplies are safe, it may be tempted to care less about the small fry, the Eastern Europeans currently facing the music.
However, NordStream swears total allegiance to EU’s unified energy policy. “As far as common energy policy exists, we are part of it on the highest priority level”, assures Sebastian Sass, NordStream’s chief representative to the European Union.
The main fear of the Eastern Europeans, however, is that while profits from the NordStream pipeline, a joint venture between Gazprom and a trio of German and Dutch companies, will flow to Russian suppliers and German utilities, the countries once under the Soviet umbrella will become more vulnerable to energy blackmail. Understandably, the pipeline issue evokes deep memories of the dark days of occupation and collaboration. But there is hardly any evidence that the din of alarm rising in the East has had a noticeable reaction, in the West.
Gazprom, a company that evolved from the Soviet ministry of gas, became the darling of investors. But with 436,000 employees, extensive subsidiaries in everything from farming to hotels, higher-than-average salaries and company-sponsored housing and resorts on the Black Sea, critics say Gazprom perpetuated the Soviet paternalistic economy well into the capitalist era. It stands to reason, however, that ultimately, considerations of European unity and fair play seem secondary in the raw struggle over resources by national and corporate interests. A web of oil and gas interests in the West, including of corporations, has eased the process of engagement with Russia.
But isn’t it ironical that free-market capitalism, the hallowed mantra of the West, should now come under fire merely because Russia has shrewdly worked this very principle in its own backyard?
M.N Hebbar is a veteran journalist and commentator on European affairs
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