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Politics Of the Pipelines
Meanwhile, Moscow isn't idle. It has dangled higher prices in front of producers including Kazakhstan and Turkmenistan. It has held talks with other gas-exporting nations, such as Algeria and Iran, about coordinating policies so they don't undercut one another. And it has deployed former German chancellor Gerhard Schroeder to promote a new direct pipeline link between Russia and Germany. (Schroeder now works for the Swiss-based pipeline venture controlled by Russia's state-controlled OAO Gazprom.)
Poles fear that a Russian-German pipeline under the Baltic Sea would enable Russia to pressure Poland, which would no longer be a transit route for Russian gas destined for Germany. In late April, Poland's defense minister, Radek Sikorski, said that the deal to build the $5 billion, 750-mile pipeline was in "the Molotov-Ribbentrop tradition," a reference to the pact between Hitler's and Stalin's foreign ministers that led to the partition of Poland in World War II.
  Russian President Vladimir Putin said last year that energy would be the "key topic" of this year's Group of Eight meeting, which opens Saturday in St. Petersburg. (By Mikhail Metzel -- Associated Press) |
"We want . . . no monopolies or blackmails, price-fixing or the use of energy as a tool of politics, or geopolitics," Sikorski said in an interview with the BBC.
Not everyone buys the U.S. vision. "It's very simple to make lines on a map," said a European energy company executive who had met with Bryza and spoke on condition of anonymity to protect his U.S. relationships. "It costs $2 billion, if not more, to build a pipeline from Turkey."
Many European companies have interests in Russian gas projects. German energy giant E.On Ruhrgas AG and chemical giant BASF AG own minority stakes in Gazprom's Northern European Gas Pipeline under the Baltic. The Italian state oil company, Eni SpA, is Gazprom's partner in the Blue Stream pipeline that carries gas from Russia to Turkey under the Black Sea.
But Russia is still worried. Eni is also building a pipeline from Libya to Italy. And Qatar says a third of its exports will go to Europe.
As part of its strategy to hang onto European markets and expand its reach, Russia wants cash-rich Gazprom to invest in European gas distribution systems in Britain, Germany and Italy. Russian officials say that if Western firms want to invest in exploration and production in Russia, Gazprom should have similar access to Western investment opportunities.
Europe is reluctant, though. In a subtle yet clear message, two European Union ministers wrote in May to the Russian government, saying the competition "rules applied to Gazprom will be no different to those applied to . . . other companies." They noted that "the fact that Gazprom is the exclusive exporter of gas from Russia to the EU, when other Russian companies and foreign joint ventures with gas reserves would otherwise be in a position to supply the EU market, will be a significant fact that will necessarily be taken into account."
"Reciprocity is something we're looking for," said the senior State Department official, who spoke on condition of anonymity because the talks are ongoing. He urged Russia to let foreign oil or gas firms explore and use Russia's pipelines.
Yet foreign investors still find Russia challenging territory. Russia has announced new limits on foreign ownership of key energy resources. TNK-BP, a joint venture involving BP PLC, has had trouble getting access to export pipelines; delays have been seen as an effort to force it to sell a stake in its fields. Last week, Russia's parliament reaffirmed Gazprom's monopoly over the nation's gas pipelines. And 10 months after releasing a short list of five foreign firms, including U.S.-based Chevron Inc. and Conoco Phillips, Russia has still not said which ones will share with Gazprom the rights to explore the big Shtokman natural gas field.
Russia has avoided a new conflict over Ukraine on the eve of the G-8 summit. In January, Russia and Ukraine reached a temporary accord, which expired July 1. A decision on new terms has been delayed until Ukraine forms a new government. That will be, conveniently for Russia, after the G-8 meeting.
Meanwhile, Moscow has been wooing foreign gas producers. Shortly after Cheney visited Kazakhstan and won a pledge from that country's president to export Kazakh gas through a trans-Caspian pipeline, Russian officials visited Kazakhstan and reportedly reached a deal for Gazprom to transport Kazakh gas.
Turkmenistan is also negotiating with Russia, seeking to raise the price it is paid by two-thirds. It may accept less, but there is still no pipeline across the Caspian, and Turkmen relations with Azerbaijan aren't great. "Turkmenistan doesn't have much of an option," said Hossein Ebneyousef, president of International Petroleum Enterprises, a consulting firm.
But if Russian concerns about competition from other nations helped raise the price paid to Turkmenistan, that is a sign that the U.S. strategy is working, U.S. officials say. And if European nations buy more supplies from Libya, Algeria and Qatar, that's as helpful as buying more from Azerbaijan. "That's the name of the game: Get more coming in from every possible direction -- except Iran, of course," the State Department official said.
