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Thursday, June 05, 2008

Gassy Friendship in the Baltic

// Russia and Germany confirm their friendship with pipelines
June 05, 2008 - Kommersant by Alexander Gabuev - The summit and business forum of the Baltic countries ended yesterday in Latvia. Moscow’s energy policy, especially toward the European Union and Baltic countries, was a key topic at the events. The hottest disputes arose over the Nord Stream project, which was bravely defended by Russian First Deputy Prime Minister Igor Shuvalov, Gazprom executives and German officials and businessmen. It seemed to Kommersant correspondent Alexander Gabuev that Russia and Europe were conducting the energy dialog in different languages.
:: Difficulties of Translation :: The current, seventh, Baltic summit was notably different from previous ones. The heads of state met behind closed doors before, but this time the meetings were made maximally public. “This is the first time the political summit was open for the business community and for the media and the business forum was organized parallel to it for the first time,” noted Alexander Shenkman, one of the organizers. “The main task was to create a place where representatives of Russia and the EU could exchange opinion calmly.” The Riga forum gave them the opportunity to discuss the problems that have built up, three weeks in advance of the Russia-EU summit in Khanty-Mansiisk. The heads of the delegations of all 11 Baltic Council countries spoke in English about how to solve the region’s problems. Danish Prime Minister Anders Fogh Rasmussen set the tone of the discussion when he said that energy security was one of the key issues for the Baltic countries. The speakers that followed developed the Danish Prime Minister’s thoughts until they came to Russian First Deputy Prime Minister Igor Shuvalov. Shuvalov announced that he would speak Russian because a large part of his audience knows the language. He began by saying that many Russian businesses are prepared to invest in the Baltic region, and the Russian government is ready to help them. “But do we understand each other well?” he asked. “No. There is great distrust in both sides.” Shuvalov took the example of Germany, with which Moscow established “the necessary political dialog to create conditions for mutual investment.” “We are holding a dialog with Germany on issues of energy security,” Shuvalov pointed out. “We consider it to be a partner that can be absolutely reliable for us and can guarantee its reliability within the framework of the EU.” The questions why Russian President Dmitry Medvedev will visit Berlin first among the European capitals and why Russian Prime Minister Vladimir Putin followed German Chancellor Angela Merkel in declining to come to Riga thus answered themselves. The Russian Deputy Prime Minister spoke passionately about energy security. “We repeat, and will keep repeating: Russia is the most reliable supplier of energy resources in the world. We hear criticism that Russia uses energy as a political cudgel. It’s not so! Don’t be afraid of Russia!” he exclaimed. Toward the end of his speech, Shuvalov talked about the 2020 plan and announced that, in 12 years, Russia intends to propose to the world “a new quality of values.” Several participants showed a desire to accept those values on the spot. “Allow me to speak German, since Mr. Shuvalov spoke Russian,” German State Minister for Europe Guenther Gloser, showing the advances Shuvalov had made just then in Russia’s political dialog with Germany. “Europe's energy consumption will continue to rise through 2050 and so Europe needs natural gas. If we want to lower our carbon dioxide emissions, we will have to meet our energy needs using Russian gas. And even if we do increase our dependency on a single supplier that way, we should just accept it.” Then the German minister criticized the Nabucco project, which is competing with the Moscow-endorsed Nord Stream, saying it is “abortive.” Most of his speech was devoted to Nord Stream. “Some countries and politicians in the Baltic region oppose this project,” Gloser said. “That is why I see our task as expelling any doubts.” First, he tried to convince his audience that Nord Stream is not a Russian-German state project, but a private deal among the commercial companies that are stockholders in the pipeline. Then he sought to prove that any alternative overland route would be much more expensive. “The compressor stations that would serve such a pipeline would require as much energy in a year as all of Estonia!” he exclaimed at Estonian Prime Minister Andrus Ansip. After that demonstration, even Polish State Secretary for European Integration Mikolaj Dowgielewicz was forced to speak Russian, giving the surprised Shuvalov cause to smirk. But with that the affair ended. It was clear from the tension looks on the faces of the prime ministers that they were not convinced of Berlin and Moscow’s good intentions.
:: Gas Reserve :: Energy discussions at the business forum were no less heated. The forum was opened by Latvian President Valdis Zatlers, who declared that “The EU needs a single energy policy.” The president’s thought was developed by Latvian Minister of Economics Kaspars Gerhards, who urged Europe to “resist increasing dependence on energy suppliers.” “To do so, it is important for us to understand what Russia’s energy strategy will be in the next decade, Gerhards continued. Then everyone was told what kind of supplier they were talking about. Representatives of E.ON and BASF, shareholders in Nord Stream, undertook to defend Russian interests. Nord Stream financial director Paul Corcoran most graphically described the benefits of the project for Europe. No one engaged him in argument. They were all waiting for Gazprom deputy chairman Valery Golubev. His appearance at the forum was one of the most discussed events there. In the corridors, European Commission representatives talked about how the presence of “someone like that” is a sign of the seriousness of Gazprom’s intentions for the Baltic states. Western journalists repeated the magic letters KGB. (Golubev worked in state security organs and in the St. Petersburg mayor’s office before joining Gazprom.) The gas giant’s deputy chairman was very late to the energy section of the forum (he flew in from Ashgabat) and addressed his audience only toward evening. Although everyone before him spoke English, Golubev spoke Russian and immediately gave his listeners an idea of the might they were contending with. “Russia has access to the Baltic Sea, and so it is part of this club, although the other side of it ends at the Pacific Ocean,” he explained. Golubev then gave a concise understanding of what Russia considers energy security. It insists on concluding contracts with a price formula that reflects world price growth for energy sources. In addition, Moscow is paying particular attention to controlling transport routes. In that connection, he talked about the merits of the Nord Stream project. According to Golubev, the main one is the following: “The project will allow gas to be provided from the producer to the consumer without any transit territories, which are sometimes complicated in their political aspects.” After his speech, he explained that idea in more detail to Kommersant. “The political processes taking place on transit territories,” he said, “are often nontransparent. That is connected with the fact that transit countries such as Ukraine lack democracy in their development. For some countries, transit tariffs become an object of political manipulation. There is no evil design in the Nord Stream project. They have begun to give it political overtones for some reason, but it is an economic project. Producers and consumers affect the price of gas themselves, and determine its income and bear its transit costs without anyone along the way sharing it with them.” After that explanation, Medvedev can visit Germany calmly. Moscow and Berlin have something to share with each other to their mutual advantage. But there is no assurance of the success of the EU-Russia summit in Khanty-Mansiisk. In the EU, even the countries that it is not pleasant to share the gas business with have a voice in policy.

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