04.05.2005
Schroeder - Putin Pact: Germany and Russia Divide Europe Again
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Simon Araloff, AIA European section
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A failure of negotiations between Germany and the Soviet Union on the Ribbentrop - Molotov Pact`s expansion to Southeast Europe preceded the collision of these superpowers in June 1941. Judging from the development of German-Russian relations for the last years, it is obvious that the both parties have learned from mistakes of the past. Today the European continent, including its southeast part, is turning into the arena of their joint expansion – this time an economic one.
And exactly as at the end of the 1930s, relations between Berlin and Moscow are being built up to the disadvantage of the East European countries, Britain and the United States of America. However, given Moscow's policy, some changes are quite possible…
"Deal of the Century" in Hannover
There is nothing new in publicly demonstrated friendly personal relations between Russian President Putin and German Chancellor Schröder. Nothing harms these relations - not loud statements from the White House about the absence of democracy in Russia, nor the expulsion from Germany of another Russian secret service officer. Frankly speaking, even the scandal around this espionage affair was lame. The attention of the German and the European press was drawn to the Hannover Trade Fair ("Hannover Messe-2005"). There, on April 12, Putin and Schröder blessed the signing of the groundbreaking "Deal of the Century" between two power giants – the German BASF and the Russian "Gazprom".
This memorandum on cooperation has been called groundbreaking for several reasons. For the first time in history, Putin's administration allowed foreign experts to get involved with gas extraction in Siberia. Secondly, the German leader agreed to the construction of a new North European Pipeline on the bottom of the Baltic Sea, outflanking Germany’s partners in the EU and NATO – namely: Ukraine, Poland and the Baltic countries. An estimated cost of this project is about $8 billion.
It includes exploitation of the Yuzhno-Russkoe gas field in Western Siberia and the laying of a gas pipe on the bottom of Baltic Sea, starting from the Russian port of Vyborg and ending at the German port of Greifswald. The project should be completed by 2010. The pipeline is expected to deliver 20-30 billion cubic meters of natural gas a year, which reaches 1,8 - 2,7 billion dollars in 2005 prices.
The partnership between "Gazprom" and BASF`s branch establishment "Wintershall", which specializes in the field of power, goes back to 1993. Rem Vyakhirev, the first head of the Russian concern "Gazprom", was still in the office at that time.
A joint venture "Wingas", intended for the laying of a gas pipe under the Baltic Sea was established at that time. Before signing the contract in Hannover, "Gazprom" possessed 35% of "Wingas" shares and "Wintershall" kept the rest. By the terms of the last contract "Gazprom" will receive an additional 15% of "Wingas", raising its stake to 50% minus one share.
"Wingas" has turned into one of two regional leaders (the other– the German "Ruhrgas") in the delivery of Russian natural gas to the Central Europe. It owns numerous transit enterprises and installations for gas processing and storage in East Europe, Germany, Great Britain, Belgium, France and Austria.
Concurrently, in 2003, "Gazprom" and "Wintershall" created another joint venture - "Achimgaz" for gas extraction from the Urengoy field in Western Siberia. This new project allows "Gazprom" to sell gas to the Scandinavian countries.
In fact, active cooperation between "Gazprom" and BASF over fifteen years slowly brought control over the European power market, its price policy and sales volume to the Russian power giant.
"Gazprom" already provided 32% of natural gas deliveries to Germany and about a quarter of all gas deliveries in the EU – about 140 billion cubic meters a year ($12,6 billion).
Until 2000, under the previous Russian president Yeltsin, "Gazprom" was practically independent of the political elite. Its president Vyahirev financially supported the Mayor of Moscow Luzhkov. After Vladimir Putin's coming to power, the situation has changed. Vyahirev has been expelled. Alexei Miller – a technocrat lacking any political ambitions, was assigned to this post. "Gazprom" has turned into the Kremlin`s obedient foreign policy tool. And each success of this firm on the European power market is automatically translated into a foreign policy success of the present Russian administration.
Part Two
Part Three
Part Four
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