A European pipedream comes true

PETER LEWIS November 30 1981

A European pipedream comes true

PETER LEWIS November 30 1981

A European pipedream comes true

Excited West German businessmen had called it the “whopper” and struggled for more than two years to reel it in. Last week, their efforts paid off when they landed a multibillion-dollar pact with the Soviet Union to build a pipeline to carry Siberian natural gas to Western Europe. It was not just the staggering size of the deal, however, that set heads spinning in Western capitals. In clinching the elusive agreement, the businessmen, with the blessing of six European governments, managed to override the objections of Washington and provide Soviet chief Leonid Brezhnev a handsome gift on the eve of a fourday official visit to West Germany.

The historic dealsigned between Soviet officials and the West German energy giant Ruhrgas—formed the first part of an overall pipeline agreement that will constitute the biggest East-West trade pact ever undertaken. Ultimately, it will cost more than $12 billion and involve West Germany, France, Italy, Holland, Belgium and Austria. The pipeline will cover 4,800 km along one of two possible routes (see map) from the Yamal Peninsula to the U.S.S.R.’s western borders. From there, an estimated 40 billion cubic metres of natural gas a year will be pumped through existing lines in Czechoslovakia and Hungary to link up with the West European grid.

Washington had stiffly opposed the deal on the grounds that it could make its allies overly dependent on Moscow for their energy, leaving them vulnerable to political blackmail. In fact, the more hawkish American opponents called it a drastic step toward the “energy Finlandization of Europe.” But Bonn, which already imports 16 per cent of its natural gas from the Soviets, countered that the deliveries of Siberian gas—at a rate of 10 billion cubic metres annually from 1984—would only boost that figure to 30 per cent. This total, they added, would account for merely five to six per cent of Germany’s total energy consumption.

For Brezhnev, the pact was a boon in more ways than one. He needs a mas-

sive amount of Western cash, equipment and know-how to exploit the new Siberian fields, which are among the most inaccessible in the world. On the Yamal Peninsula, the thermometer drops to -60°C during nine-month-long

winters. In summer, torrential rains turn the soil into a quagmire. Even during the best of years, construction work is limited to 80 days. Happily for Brezhnev, the deal leaves it to energy-starved Europe to bear almost the full cost of the pipeline. Bonn will provide $4.6 billion in loans and equipment, France $4 billion and Italy, Holland and Belgium roughly $1.2 billion each. Thus, Brezhnev will not only succeed in opening up the immense gas fields for a song but also earn a steady hard-currency income which could amount to $8 billion a year over the 20-year life span of the accord.

But the political benefits for Moscow could be no less huge. The deal will permit it to claim that,despite raw East-West tensions, the Kremlin and Western Europe can 3 still conduct business ^profitably, in spite of £ American claims that détente is dead. That message could also influence the nuclear debate raging in Western Europe over NATO plans to deploy new nuclear missiles as a counter to existing Soviet strength. Until now, the Kremlin has employed mainly political pressure to convince NATO members that they should abandon the plan. But, in the wake of the pipeline deal, Moscow will likely switch to an economic siren song as well, arguing that ever wider trade is the best guarantee of peace.

Washington will be watching nervously to see how this argument is received by the West Germans. And indications are that Bonn will be easily persuaded. Soviet calls for wider economic co-operation are likely to find a strong echo in a country in which trade with the Eastern bloc already provides 200,000 jobs. At the same time, German businessmen and politicians have never concealed their distaste for trade boycotts against Moscow. They maintain that, far from encouraging the Kremlin to throw its weight around, more twoway trade will serve to constrain its behavior. As one advocate of the pipeline deal explained: “By 1990 the Soviet Union will be earning one-third of all its hard currency from sales of gas. You can’t tell me they will throw that away on a political whim.” —PETER LEWIS