The mutual dependency of Russia and Germany in the energy sector should be placed in broad historical context. Throughout the Cold War, Germany sought to insulate the energy trade from global politics, and its approach to Russian energy today draws heavily on precedent. The Friendship, Trans-Siberian, and Nord Stream pipelines all demonstrate Germany’s effort to forge energy relations with Russia beyond politics. In Germany, business and industry interests have long trumped politics.
During the Berlin Crisis and Cuban Missile Crisis, when the U.S. sternly opposed cooperation with the Soviets, Konrad Adenauer helped finalize a new oil pipeline from the Urals-Volga region. The Druzbha (‘Friendship’) line ran 7,500 kilometers from newly opened fields to Eastern Europe and beyond, reaching West Germany in 1963. The project, which was highly advanced for its day, required 40-inch diameter steel pipes that Soviet industry could not yet produce. Only select Western companies, above all in Japan and Germany, had the capacity to produce these pipes, so an historic deal was reached: Soviet oil for pipes. The German company Mannesmann alone provided 179,500 tons of piping in 1960, as Soviet-German trade in general increased 110% between 1958 and 1960.[i] Total oil import increased from 260,000 million tons (mts) to 1,920,000 mts between 1958 and 1962.
American opposition to German policy was clear. Both the CIA and State Department issued statements condemning Europe’s turn to Soviet energy. The Druzhba pipeline could finance Soviet militarization and be used to supply potential ground troops in Eastern Europe. It ran against the doctrines of containment and deterrence which the Americans spearheaded. Representative Paul Kitchin (D-NC) tied the pipeline squarely to, “a world dominated by international communism.” Senator Kenneth Keating (R-NY) argued that Khrushchev wished to “drown [the US] in a sea of oil.” Keating cautioned against permitting Europe to depend so heavily on the East for vital defense and industry. Hubert Humphrey (D-Minn) claimed that Soviet oil was, “perhaps…more dangerous than the military offensive threats.” [ii] These opinions became the foundation for the Export Control Act of 1962 that extended prior trade embargoes against the Soviet Union. A National Security Council resolution on possible trade sanctions considered oil and wide-diameter pipe to have potential ‘military significance.’ And the Kennedy Administration encouraged NATO to call on members to reduce Soviet oil imports to 10% of their respective overall markets, and to end the pipe trade.
Adenauer had hoped to forge a bilateral relationship with the Soviets independent of broader Cold War tensions. German business had enormous influence in government, and the foreign trade committee of the Bundestag voted against implementing the American-backed embargoes. They became law only because Adenauer’s CDU party delayed voting and walked out of Parliament on the final day of the review period. Bilateral trade plummeted, the German steel industry suffered, and antipathy toward American policy grew.[iii] The foreign minister admitted to having set foreign policy objectives—demonstrating unity with the U.S.—above the more immediate economic interests of his nation.[iv] Germany would not make that mistake again, as Soviet energy became even more attractive in the 1970s.
Germany’s softer approach to the Soviet Union continued under Willy Brandt, when negotiations for a new gas pipeline from Western Siberia began. Once again, bilateral trade developed largely irrespective of American opposition, and Germany insulated the energy trade from Cold War tensions. Soviet oil and gas had been a welcome alternative to Middle Eastern sources throughout the 1970s, a period of détente between the Superpowers. But the Soviet invasion of Afghanistan in 1979, followed by Moscow’s crackdown on democratic opposition in Poland after 1981, marked a return of the Cold War and major American arms buildup. Still, Chancellor Helmut Schmidt arrived in Moscow in 1980 to pen the next big deal: the Trans-Siberian Gas Pipeline (Urengoy-Pomary-Uzhgorod, later, Yamal). West German banks were the largest financiers of the project, and German industry the major producer of pipes. Ruhrgas of Germany spearheaded a consortium of companies from the Netherlands, Belgium, Italy, Austria, and France. Upon completion in 1983, the pipeline extended some 5,000 kilometers from the Urengoy to Ukraine, through which it entered Europe. The final contracts called for 27bcm of Siberian gas per year, of which West Germany took 10.5bcm.[v] It doubled the entire gas export from the USSR to the West.[vi] As conditions around the Persian Gulf deteriorated after the Iranian Revolution, the Germans were committed to Soviet energy. One official defended the new gas deal plainly: “No one can tell me that the Straits of Hormuz is a safer energy channel than a gas pipeline from Russia.”[vii]
The Reagan Administration launched a campaign to undermine the Trans-Siberian Pipeline, but the Germans were confident in their bilateral ties to the East. The American position was clear in a CIA assessment of 1981, which clarified the political leverage that increased European dependence afforded the Soviet Union. The Soviets would not threaten a complete cut-off of gas supply, the report conceded, but wield more subtle influence to discredit American policy in Europe. The Soviets would capitalize on Europe’s “lack of cohesion and strategic perspective” on energy issues.[viii] Secretary of State Alexander Haig proposed a plan to substitute American coal for Soviet gas, and promote additional liquefied natural gas (LNG) for Europe from North Africa. When European companies nevertheless signed contracts for Siberian gas, Reagan pushed for an embargo of critical compressor parts that the USSR needed for the pipeline. Offending companies were then blacklisted and banned from all U.S. exports. This hard line dovetailed with the estimation of CIA Director William Casey, Secretary of Defense Caspar Weinberger, the President, and other officials that Soviet dependence on Western technology was a strategic weakness the U.S. had to exploit.[ix]
The German Ministry of Economy, in consultation with Ruhrgas, studied the security risks of increasing dependency on Soviet gas and concluded that American concerns were overblown. The Soviet Union could not disrupt West German supply without simultaneously affecting a number of third parties and ruining its international reputation. Should gas from West Siberia be compromised rather because of technical difficulties, the West Germans could compensate this temporary loss with additional supplies from the Netherlands or higher domestic production. Otherwise, the Soviets had been reliable energy suppliers for decades now, and needed the hard currency, pipes, and equipment from the West for its own internal development. European companies continued shipping parts to the Soviet Union, and Reagan, confronting opposition both at home and abroad, canceled the embargo in November, 1982. West Germany and other European allies had agreed to keep overall gas dependence on the USSR below 25%.[x]
The trend toward favoring Russian energy and de-politicizing the trade, notwithstanding opposition from Western (and now East European) allies, continued after the collapse of the Soviet Union. German Russlandversteher (‘Russia apologists’) like Gerhard Schröder supported Russia’s economic revival and political centralization in the 1990s, even as democratization failed and the state promoted Gazprom and Rosneft above private companies like Yukos, which it forcefully disbanded in 2003.[xi] Schröder was one of the major advocates for the Nord Stream gas pipeline to connect West Siberia to Germany directly beneath the Baltic Sea. After ending his term as Chancellor, Schröder became board chairman of the Nord Stream consortium in 2005, in which Gazprom was the majority shareholder with 51% (German companies BASF/Wintershall and E.On each owned 15.5% shares; and the Netherland and France were minority holders). The former chairman was Dmitry Medvedev, who became President of Russia. Poland and the Baltic States complained that Nord Stream would bypass them entirely, and that Russia was exerting too much influence over Germany. Poland’s defense minister, Radoslaw Sikorski, famously likened Nord Stream to a new Molotov-Ribbentrop pact (1939) between the powers. Gazprom had also cut the flow of gas to Ukraine the prior winter amid ongoing disputes over control of pipelines and pricing, and Naftogaz of Ukraine had resorted to siphoning off an amount intended for Europe. The nation was the largest transit route to the Balkans, Central Europe, and Western Europe: 80% of Russian gas imports to the EU passed through Ukraine at the time of the disruption, 20% of its total natural gas supply. At one point, Gazprom CEO Alexei Miller even told the Europeans: “get over your fear of Russia, or run out of gas.”[xii]
With opposition mounting from Poland, and in the wake of the cut-off to Ukraine, the Greens pressured Parliament over Nord Stream in July, 2006. It responded simply that nations like Poland, worried about the project and German dependence on Russia, merely required more information. Whether these nations might receive gas through branches from Nord Stream was a business decision the German government could not influence. Otherwise, supplies to Germany would be secure since the contracting companies would help Russia open new fields in Western Siberia, and Russia was a reliable long-term partner in the energy sector.[xiii]
The debate over Nord Stream heated up when Gazprom stopped the flow of gas to Ukraine again in winter of 2009, after negotiations over transmission and pricing failed once again. The stand-off ended on January 20 after mediation by the EU, and although Germany was not as strongly affected as its East European neighbors were, the Bundestag revisited the issue of Nord Stream.[xiv]And once again, it refused to politicize the gas trade, tacitly supporting Russia’s actions. Parliament argued that the new 10-year contract between Naftogaz and Gazprom would secure Ukraine’s supply, and that Germany was energy secure in any case, given the Jamal pipeline through Belarus and Poland and supplies from Norway. The entire issue was a business matter, and Germany was moving to reduce reliance on fossil fuels long-term through the Energiewende in any case. Parliament conceded that Gazprom had compromised its reputation by halting the flow to Ukraine, but claimed it would repair that reputation and remain a reliable supplier to Germany. In the short-term, Germany was poised to increase dependence on natural gas, and Nord Stream promised more energy security. In other words, Parliament was suggesting that Nord Stream was a response to the instability and unreliability of transit nations Ukraine and Belarus.[xv]
The Greens asked the Bundestag again in 2010 about the risks of Nord Stream, both environmental and political, but Parliament continued to downplay the geopolitical and strategic dimension of the Euro-Russian energy trade. Germany had “traditionally” relied on Russia for natural gas, and Russia possessed the greatest gas reserves (conventional and unconventional) in the world. German contracts served to further open those valuable reserves, and Nord Stream would serve Germany for decades to come. Parliament did not even mention Ukraine, though the Greens had asked specifically about the most recent shut-off.[xvi] These statements dovetail with the conclusions of Röhrkasten and Westphal, who interviewed 25 energy experts in Germany in 2012. The authors found that the experts did not consider Nord Stream a geopolitical issue, and that gas transit through Ukraine had, “almost become a non-issue.”[xvii]
By contrast, American lawmakers considered Nord Stream and the entire energy business with Russia in geopolitical and strategic terms, a view more closely aligned with Eastern Europe than with Germany. Their views were already clear in a Senate Subcommittee hearing Senator Joe Biden oversaw in 2008. Former national security advisor, Zbigniew Brzezinski, urged Germany to open branches from Nord Stream to Poland and the Baltic states, but implied that the Russian state dominated decision-making, and that serving Eastern Europe with Nord Stream was not in Russia’s interest. Brzezinski considered the fact that Gerhard Schröder had become chairman of the board at Gazprom a “complication that cannot be…ignored,” and a “rather peculiar circumstance.” It was unlikely that Germany would oppose Russian plans for Nord Stream under such circumstances. Brzezinski added that Russia/Gazprom was splitting the EU by forging bilateral energy relationships: with Germany over Nord Stream, and with Italy over South Stream. Former correspondent for Radio Free Europe, Roman Kupchinsky, charged that Gazprom had close ties to organized crime in Eastern Europe, and that subsidiary Gazprom Germania funneled most of its revenue through shell companies abroad.[xviii] Elsewhere, Kupchinsky outlined the ties Gazprom executives had with the former East German secret police, the Stasi. Such powerful individuals “serve a vital purpose in creating an illusion that Gazprom is honorable and transparent, and that it is indispensable for European energy security.”[xix]
A more recent Minority Staff Report for the Committee on Foreign Relations in support of a Southern Corridor for gas to Europe summarizes the American position well. The report cites numerous instances between 1998 and 2012 in which Russia wielded the energy weapon to win favorable contracts, acquire energy infrastructure, or influence political decision-making. This includes Lithuania and Latvia between 1998 and 2004, Moldova and Georgia in 2006, and Ukraine in 2006 and 2009. In 2008, Russia cut the gas supply to the Czech Republic after it agreed to host a U.S. defense radar in 2008; and in 2010, Russia offered Ukraine a $40 billion, ten-year discount on gas in exchange for a 32-year extension for the Black Sea Fleet in Crimea. The Americans were pushing for an alternative route from the Caspian Sea to Europe to undermine Russia’s tactics:
Russian energy cutoffs in the cold of winter, energy contract coercion, and use of the Nord Stream and South Stream pipelines to further isolate certain European markets have underscored the need for an alternative gas corridor to Europe.[xx]
The Southern Corridor is making progress today, but opposition to Russia’s energy tactics still falters at Germany’s doorstep, in part because its transition to renewables demands natural gas.
The U.S. and EU have levied sanctions against Russian energy in light of the ongoing crisis in Ukraine. But Russia and Germany have nevertheless agreed to expand the Nord Stream pipeline, effectively undermining the long-term impact that these sanctions will have. Economic development and the Energiewende trump politics in Germany today, much as business and industry prevailed during the Cold War.
[i] Bruce W. Jentleson, Pipeline Politics: The Complex Political Economy of East-West Energy Trade (Ithaca: Cornell University Press, 1986), pp.88-9.
[ii] Jentleson, Pipeline Politics, pp.98-100.
[iii] Jentleson, Pipeline Politics, p.116.
[iv] Claudia Wörmann, Osthandel als Problem der Atlantischen Allianz: Erfahrungen aus dem Erdgas-Röhren-Geschäft mit der UdSSR (Bonn, 1986), p.35.
[v] Per Högselius, Red Gas: Russia and the Origins of European Energy Dependence (New York: Palgrave MacMillan, 2013), pp.182, 186.
[vi] Jeronim Perović, “Russlands Aufstieg zur Energiegroßmacht: Geschichte einer gesamteuropäischen Verflechtung.” Osteuropa 63 (2013), p.27.
[vii] In Jentleson, Pipeline Politics, p.169.
[viii] Central Intelligence Agency, “USSR-Western Europe: Implications of the Siberia-to-Europe gas Pipeline” (Mar. 1981), released 1999.
[ix] David S. Painter, “Oil and the End of the Cold War,” unpublished manuscript (2008), p.8. With permission of author.
[x] Högselius, Red Gas, pp. 181-193.
[xi] Yukos head Mikhail Khodorkovsky, who had political aspirations at odds with Putin’s, was imprisoned on charges of tax evasion.
[xii] In Daniel Yergin, The Quest: Energy, Security, and the Remaking of the Modern World (New York: Penguin Press, 2011), p. 341.
[xiii] Deutscher Bundestag, Drucksache 16/1925 (22.06.2006). The Greens also asked about the environmental impact of the pipeline, and whether it could once day carry biogas rather than natural gas.
[xiv] Commission of the European Communities. “The January 2009 Gas Supply Disruption to the EU: An Assessment” (Brussels, 16.7.2009), p. 2, 11.
[xv] Deutscher Bundestag, Drucksache 16/11957 (13.02.2009). In Red Gas, Högselius also argues that Nord Stream was a response to instabilities in Ukraine and Belarus.
[xvi] Deutscher Bundestag, Drucksache 17/1375 (14.04.2010).
[xvii] Sybille Röhrkasten and Kirsten Westphal, “Energy security and the transatlantic dimension: a view from Germany,” Journal of Transatlantic Studies 10:4 (Dec. 2012), pg. 337.
[xviii] Senate Subcommittee on Foreign Relations. “Oil, Oligarchs, and Opportunity: Energy from Central Asia to Europe.” Hearing of June 12, 2008.
[xix] Roman Kupchinsky, “Gazprom’s Loyalists in Berlin and Brussels,” Eurasia Daily Monitor 6:100 (2009), accessed online.
[xx] Committee on Foreign Relations, “Energy and Security from the Caspian to Europe” (Dec. 12, 2012), pg. 2. President Putin declared South Stream defunct in December, 2014.