Clearing the way for the biggest East-West business deal in history, West German gas company officials today signed an agreement with the Soviet Union to receive a major share of the natural gas from a new pipeline system that will stretch from the Arctic fields of Siberia to the industries and homes of Western Europe.
With Soviet President Leonid Brezhnev due to arrive in West Germany Sunday, Soviet negotiators removed the final obstacle to the deal by lowering their price for the gas and clinched a contract with the leading West German gas distributor, Ruhrgas, that has taken more than two difficult years to bargain.
West German gas officials said the agreement would bring about $45 billion worth of gas to this country over the next 25 years and nearly double West Germany's dependence on Soviet gas. The pipeline is to bring 1.4 trillion cubic feet of gas annually to Western Europe, the energy equivalent of about 700,000 barrels of oil a day.
Hundreds of thousands of jobs for Western Europe's recession-hit economies are at stake in the project. Orders for elements of the pipeline have already been spread to major contractors and many subcontractors throughout Europe, and more are expected. Purchase of the steel pipe itself, which accounts for roughly half the cost of the entire project, is to be negotiated by the Soviets on a year-to-year basis from competing West German and Japanese firms.
The pipeline has drawn objections from the Reagan administration, which sees the project as undercutting its own efforts to control strategic commerce with the Communist Bloc as well as fostering an allegedly dangerous Western European dependence on the Soviet Union.
But West German officials -- in addition to officials in France, the Netherlands, Belgium, Italy, Austria and Switzerland where the rest of the gas will go -- have dismissed such arguments and pursued the deal as a means of easing Western Europe's oil dependency on the Middle East.
In deference to the political sensitivity of the project, few Bonn officials attended today's signing, held amid toasts of champagne at Ruhrgas headquarters in Essen.
The Ruhrgas board chairman, Klaus Liesen, who signed with Soviet Deputy Foreign Trade Minister Nikolai Ossipov and Soyuzgasexport Chairman Yuri Baranovsky, called the contract "a logical step in order to make more environmentally favorable energy available to households and firms for the long term."
A Ruhrgas spokesman said no single price had been fixed for the gas West Germany would buy but said the total value would be around $45 billion over the next 25 years.
Liesen indicated that the Soviets relaxed a demand that the gas be priced equal to higher quality crude oil. He said the gas price would be "tied to the overall trend of heating oil prices" against which the natural gas companies compete.
Stressing the economic benefit for West Germany, Ossipov said the pipeline project, which is expected to cost $10 billion to $15 billion, would help secure jobs for West Germany. He said the West German steel firm, Mannesmann, could expect a large order for pipe.
The Soviets stand to earn more than $7.5 billion annually in hard Western currency when the gas starts flowing.
The Ruhrgas contract provides for up to 420 billion cubic feet per year of Soviet gas, boosting West Germany's gas dependency on the Soviet union from 17 percent to 30 percent and its overall energy dependency on the Soviet Union from 3 percent to 5.5 percent.
Other European gas companies are now expected to reach price accords with the Soviets for the rest of the new Soviet gas. French officials, negotiating for 280 billion cubic feet annually, completed a round of talks with the Soviets this week and are thought likely to sign in December.
In a last-minute U.S. effort to sidetrack the project, Meyer Rashish, assistant secretary of state for economic affairs, came to see Western European officials earlier this month, offering alternative energy sources. The list included promises of improved U.S. coal deliveries, cooperation on developing synthetic fuels, reprocessing of nuclear fuel and assistance in locating natural gas sellers outside the Soviet Union.
U.S. officials also argued that since 1978, when Western Europeans began discussing the Siberian pipeline, the economic factors affecting East-West gas trade have changed. Overall energy growth rates are down, markets are soft and substitution of gas for oil has slowed.
But Western European officials say there will still be a gap between gas supply and demand in Europe through the 1980s and 1990s. They cite Dutch plans to cut major gas output and Norway's reluctance to expand its North Sea production as proof that Soviet gas reserves, which account for about one-third of the world's known reserves, must be tapped further.
The energy alternatives offered by Rashish were seen by European officials as, at most, complements, not replacements, for the Soviet gas. West German officials have privately voiced amazement at continuing U.S. criticism of the gas purchase in view of Western Europe's economic interest in the project and its commitment to keeping detente with the Soviets alive.
Western European governments see the deal as helping to stabilize East-West relations through enlarged economic cooperation. West German officials have begun exploring other energy projects with the Soviets in the fields of coal liquefaction and nuclear power.
On the risk of the Soviets cutting off the gas, Western Europeans say Moscow would never do it because this would damage the pipeline and result in a loss in hard currency highly valued by the Soviets.
If the gas were stopped, Europeans point to precautions that include systems for switching fuels and surge capacity of Dutch gas that would lessen the impact.
The biggest construction contracts awarded so far are for 41 compressor stations, 22 of which will be built by a West German-French consortium led by Mannesmann and Creusot-Loire, and 19 by an Italian group led by Nuovo Pignone, a subsidiary of the state-owned ENI group.
Several U.S. firms also stand to benefit. Caterpillar has Washington's approval to export pipe-laying machines for the project and General Electric hopes to license its technology for some of the gas turbines on the line. Exxon Corp. and Texaco Inc., through German subsidiaries, together hold more than 12 percent interest in Ruhrgas.
A major reason negotiations for the project took so long has been Soviet insistence on bargaining about each of the three elements of the deal -- gas deliveries, equipment orders and financing -- separately with partners in each affected country rather than talk with a single Western European consortium. The apparent goal of this tactic was to play Western European companies and banks off against each other.
The pipeline is to carry gas from Siberian gas fields 2,800 miles to the Soviet Union's western border, and from there through either Hungary or Czechoslovakia to West Germany and the Western European grid.