Deutche Welle
May 1, 2006

While Europe is getting increasingly nervous about its reliance on Russian natural gas, Germany is getting its share of criticism for partnering with Russia to build a Baltic Sea pipeline. Poland has again criticized neighboring Germany for leaving it out of the picture in a project with Russia to build a gas pipeline beneath the Baltic Sea.

“Taking the decision first and consulting after is not our idea of solidarity,” Defense Minister Radek Sikorski said on Sunday during a round table discussion on energy in Brussels.

“Germany is an important partner for us. We are astonished that Germany would do something which doesn’t benefit the consumers and whose geopolitical objective is to be able to cut off Belarus and Poland without cutting off Germany,” he said.

“Poland has a particular sensitivity to corridors and deals above our head. That was the Locarno tradition, that was the Molotov-Ribbentrop tradition. That was the 20th century. We don’t want any repetition of that,” Sikorski said in a reference to Hitler’s nonaggression pact with Stalin in 1939 which allowed Poland to be carved up between the Nazis and the Soviet Union.

In early March Poland’s conservative President Lech Kaczynski had already criticized plans for the pipeline saying it was “in flagrant contradiction with Polish interests”

Russian state-controlled energy giant Gazprom and German companies BASF and E.ON agreed in September to build the 1,200-kilometre (740-mile) natural gas pipeline.

The Baltic states of Estonia, Latvia and Lithuania have also been up in arms over the project. Poland and its Baltic neighbors say the pipeline not only deprives them of transit fees, but poses environmental risks and undermines their energy security. The former Soviet Union dumped tons of chemical weapons in the Baltic Sea following World War II, and construction of the underwater pipeline could disturb them, these countries have said.

A heat war?

Poland is not the only European country which sees the Russian energy supplier as a political and economic hot potato. Tensions between Russia and the European Union burst into the open last week over Gazprom’s hard-headed ambitions to control everything from supply to distribution of European gas.

Gazprom has a swagger in its giant step and is making some in Europe nervous with its sheer size, its control of vast gas reserves and declared intention of getting into the retail end of the industry on European soil.

Already, the European Union gets 26 percent of its natural gas from Gazprom and Russian President Vladimir Putin has a blunt response to any EU jitters.

“We constantly hear about some threat of dependence on Russia and that Russian companies should have limited access to the energy market,” he said in the Siberian city of Tomsk Thursday after meeting German Chancellor Angela Merkel. “What are we to do when we hear the same thing every day? We start to look for other markets.”

When Gazprom talks, the energy-hungry West listens.

A Russian giant

The company’s market capitalization leapt Wednesday to $266 billion (212 billion euros), making it second only to the US ExxonMobil among world energy companies.

The semi-public company controls 60 percent of Russia’s immense natural gas reserves and has monopoly control over the country’s gas pipelines.

Now Gazprom, whose policies and managers are closely linked to the Kremlin, is looking to eat up more than a dozen European assets such as Centrica, which distributes gas across half the British market, Deputy Chairman Alexander Medvedev said last Tuesday.

Putin this week blasted what he said were moves being considered in Britain to block a Gazprom acquisition of Centrica “under the slightest pretext.”

“When people come to us, it is investment and globalization, but if we plan to go somewhere, then it is already the expansion of Russian companies.”

No reciprocity

According to Adam Landes, oil and gas analyst for Renaissance Capital, however, Gazprom is far from the innocent party it claims to be.

“There is no reciprocity, Gazprom is criticizing Europe for not opening its markets but Russia is completely shut,” he said. “Gazprom responds ruthlessly to threats… it always behaved like that.”

Austrian Economy Minister Martin Bartenstein warned that an EU-Gazprom conflict would “have no benefit.” British Prime Minister Tony Blair’s government has also indicated that Gazprom is free to shop for Centrica.

But the European Union has ratcheted up pressure on Russia to sign its Energy Charter, a document that regulates energy transport and would prohibit any signatory from disrupting contracted supplies for any reason.

A stillborn pact

Medvedev told participants at an economic forum in London last week that the energy pact between Russia and the EU was “stillborn.”

According to Putin’s economic advisor Igor Shuvalov, this kind of tension was to be understood as part of Russia’s growing pains.

“Russia is part of the family; we were considered the small kid,” he said. “Now we are growing and we raise our voice.”