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October 01, 2007 (the date of publication in Russian)

Konstantin Cheremnykh

THE WHIMS OF DISTORTED PERCEPTION

Brussels' bureaucrats and Tallinn's transit barons stumble against unpleasant reality

THE MOEBIUS BAND

Sometimes it seems that the European Community lives in accordance with the relativity theory. The political logic of the Eurobureaucracy is turned inside out and fastened shipshape from the other side like the Moebius band. The same things acquire different names, depending on circumstances.

When Total, a French mega-corporation, directly purchases a share in a Saudi pipeline, this is regarded as a quite acceptable market deal, even though the major stake is going to be owned by the Kingdom's state-owned corporation. But when Gazprom, a state-dominated Russian company, is going to purchase a share in a European refining facility at a perfectly transparent European auction, this intention is denounced as a "backdoor deal".

When the same Gazprom refuses to extrapolate the global fuel prices to its domestic market, this reluctance is denounced with a flagrant term of "protectionism". But when the EC forbids European owners of distributing networks to sell assets to Gazprom, this measure is delicately interpreted as "pursuit of the interests of domestic markets".

When the same EC finds out that in the national province of Mari-El in the Central Volga area, schoolchildren don't bother to study the local Ugro-Finnish dialect, the federal powers of Russia would be blamed for violating human rights. However, when 30 per cent of the population of the Baltic States is not allowed to teach their children in their native Russian language, this phenomenon is regarded as nothing special.

Even such a universally sensitive subject as protection of environment acquires polar interpretation in the European bureaucratic bodies. A furious Warsaw enjoyed strong support from the environmentalist community while puffing up – along with Tallinn all kinds of menaces for Mother Nature emerging from construction of the North European Gas Pipeline (North Stream) across the bottom of the Baltic. The same circles did not much bother over Warsaw's proposal to construct a new nuclear plant jointly with Vilnius, as well as similar proposals, addressed by Tallinn to Helsinki. This double environmentalist bookkeeping the left hand is scared, the right one isn't acquired a universally acceptable interpretation of concern for Europe's energy security. That suggests that the only real threat of this security is posed with the very existence of Russia.

 

SO, WHO IS SPLITTING EUROPE?

The double interpretation of the same definitions by the European bureaucracy is obvious not only for Russian gas traders or for the Russian minority in Estonia. The September 19 decision of the European Commission to "hive off" the European gas market aroused irony in the editorial of Wall Street Journal. The American Schadenfreude is well substantiated: shortly before the package of five documents, all of them supposed to restrict the "excessive appetites" of Gazprom, the European Commission imposed an astronomic fine upon Bill Gates' Microsoft Corp.

Just a month before, Estonian MP Igor Gryazin, a more ardent Russia-hater and Mother Nature-lover than any of his ethnic Estonian colleagues from the rightist Party of Reforms, opened the European Community's eyes on the secret design of Moscow, declaring that Russia’s actual goal is to disintegrate the European Union by means of its gas export policy. However, the September 19 EC discussion over "liberalization" of the European fuel market created a deeper split across Europe than Moscow or Washington could ever dream of.

EC's Commission for Competition declared that in the whole EU, energy production should be separated from energy distribution. The pretext for the reform is derived from the assumption that the energy producer, independently selling energy to the consumer, is interested in depriving of his rivals from access to his networks, in order to impose monopolistic prices. The Commission referred to last year's statistical study of the European energy market which implied that competition in this sphere is "insufficient", and for that only reason, for the sake of decreasing consumer prices, all the major companies should be mechanically divided into producing and distributing firms.

Market competition, undoubtedly, is a sacred cow of the liberal set of values. The paradox is that private ownership is another sacred cow. Therefore, major energy corporations, accused of monopolism, responded with their own ideologically perfect counterarguments. In particular, RWE's president Berthold Bonnekamp accused the EC of an attempt to impose a "coerced expropriation of private property".

It is quite obvious that not a single mentally sane capitalist would sacrifice his fortune for nothing but an abstract principle, which, moreover, is regarded by corporate analysts as unworkable. E.ON's spokesman insists that "separation of the networks does not increase competition, does not boost investments, and does not reduce prices".

Quite naturally that the top management of Gazprom which, like E.ON, is both a producer and a distributor, expresses a similar view, reasonably adding that the consumer prices are rather determined with the supply of the product and the purchasing capacity at the consumer market.

Thus, Neelie Kroes, European Commissioner for Competition, has not only separated Europe into two camps of states with different traditions of ownership policies and energy management, but in accordance with the logic of most vigilant Estonian conservatives has pushed one of these camps into the ideological embrace of Moscow.

The Eurobureaucracy has actually stumbled not only upon the contradiction of two classical ideological principles, but also upon its inability of insight in the motives of its own. The unification of cultural standards has marched so far that the participants of the debate even fail to realize the extent to which their arguments are predetermined with national and not all-European prejudice. Any curious Russian schoolboy would find an answer in his textbook of new history on the geopolitical background of the above described logic of Neelie Kroes, a Dutch politician, and trace the difference from German and French tradition of thinking far beyond the present economic circumstances and its statistical interpretation.

Eventually, the Gordian knot was cut with a concession: to allow major companies, engaged in production and delivery, to manage its transport networks under the condition that those are formally conveyed to a separate company with an independent management. WSJ's editors correctly ridiculed this solution, indicating that Gazprom, the very company which the anti-monopolist package was supposed to restrict, has got a perfect possibility with its head of board sitting in the federal government to establish a formally independent "Potemkin-village" owner of distributing networks. For France, where energy distribution is controlled by state-dominated companies, this task might be even easier.

 

THE LAST PR SUCCESS

However, the reality which is clear for experts of self-sufficient states and their corporations, is not an axiom for the minor newcomers of the European Community essentially dependent in basic revenues from larger neighbors but overwhelmed with self-esteem of political sovereignty. In Estonia, the above described debate in the European Commission which has not changed, and could not change anything in the economic practice were regarded a signal for resolute action! The logic was penny-plain: in case Brussels cracks upon Moscow and Berlin, why not to join the "big EC brother" and reach the Russians and Germans a kick? On the next day (!), September 20, the Government of Estonia ruled that the joint Russian-German company, managing the North Stream project, should not be allowed to carry out research on the sea bottom within Estonia's economic zone. Why? "Because we don't need this pipe", explained Foreign Minister Urmas Paet.

Certainly, the governments decision was substantiated with supreme considerations of security. Terrific military strategic implications, potentially emerging from a peaceful pipe idly resting on the bottom, were anticipated both by the ruling coalition of Estonian parties and by the supposedly Russia-tolerant coalition of centrists and greenies. Actually, each of the sides was holding its own fico in the pocket. Edgar Savisaar, chairman of the Centrist Party, was too reluctant to leave the lucrative post of Mayor of Tallinn, while the ruling rightists were seeking a new pretext to demonstrate their anti-Russian courage to their voters.

On the day of the government's session, Postimees daily newspaper disclosed a secret document, making clear that the top government officials, belonging to the ruling rightist parties, were actually in complete disarray on the issues related to the North Stream. The scandalous leakage only increased fears of politicians, as the public opinion was already too sensibilized with environmental, as well as merely anti-Russian and anti-German propaganda.

Jaak Aviksoo, a scholar turned Minister of Defense, vaguely noted: "We'd say no [to exploration], and then look and see". It appeared unnecessary to "look and see" for a long while, as Finlands Prime Minister Matti Vanhanen who earlier generously conceded its part of the pipeline's route to Estonia easily agreed to return to the original option. Thus, it was suddenly revealed that the problem of transit can be solved without Tallinn in any role of a partner, or of an obstacle. Thus, the whole political hullabaloo, launched by the Estonian rightists, with the demonstrative removal of a war memorial in Tallinn and a demonstrative trial over the "hooligans" who tried to prevent this act of barbarism, appeared meaningless.

A reader of Postimees daily left an ironical note on the website's forum: "This may be the last day when the whole world is talking about Estonia". True, at the board meeting of North Stream Company in Sochi, Russia, its head of review board Gerhard Schroeder assured the partners that the project is going to be implemented in accordance with the schedule. His confidence was based not on his trust to the leadership of Russia but on his belief in the common reason of the European consumer the very beneficiary whose interests ("The consumer is the king!") Neelie Kroes had been so energetically standing for.

 

THE TRIPLE BILL

On the very day when the Government of Estonia decided to "say no, and then look and see", European Energy Commissioner Andris Piebalgs sincerely admitted that the demonopolization of the European energy market in the fashion, invented by Mrs. Kroes, is unlikely to result in decrease of consumer prices. He added that the package of resolutions, imposed by the Committee on Competition, does not concern the North European Pipeline thus repeatedly confirming that Germany is not the only European nation interested in the ambitious joint venture.

Just a week before, the abovementioned Professor Gryazin, a close political partner of monument-fighter Andrus Ansip, fervently tied to convince the Estonians that the North Stream project is doomed to fail, as it hasn't achieved financial support from the European Central Bank, and that the "grouping in Gazprom, involved in the project", is going to be dismissed, as it is composed of criminal elements (sic).

One could just wonder whether Mr. Gryazin, a professional lawyer, was mislead by gossips in the Moscow-based New Times website, or with further-reaching research of German criminologist Jürgen Roth, stuffed with quotes from FBI officials, or maybe FBI's Director Robert Mueller, who recently visited Tallinn. Though actually, Mr. Gryazin could derive his belief in the doom of the Russian-German project from the personal statements of Estonia's President, ex-US citizen Toomas Henryk Ilves, who assured the audience of the Center of Strategic and International Studies in Washington in June that Estonia will effectively sabotage the environmental expertise of the project for at least three years. What else but the will of Uncle Sam, crossing the waters, laws and convenances, could Mr. Gryazin rely upon, when he insisted in April on an arbitrary expansion of Estonia's territorial waters? What else could Prime Minister Ansip count upon, being quite aware that the abolition of exploration in anyone's economic waters for international needs contradicts to the UN Convention on the Law of the Sea?

Actually, Estonia had been in the vanguard not only in revision of international law. In early September, its Defense Ministry announced that Estonia, and not Bill Gates, will protect NATO from hostile hacker attacks on government websites of member countries. (The reference point was the scandal around the breakup of major Tallinn ministerial websites by unidentified common Russians, protesting against the demolition of the war memorial naturally, ascribed to Moscow's special services, peeping out of every hatchway).

The same rightist government of Estonia was in the vanguard of accepting special obligations of assistance to the "friends in anti-Russian need". At the abovementioned government session on September 20, Urmas Paet explained that the environmentally obsessed Estonia is not against the North European pipeline, if it is pulled across the land and not under the sea, and particular, cross the territory of Poland with relevant transit benefits for Warsaw. Esko Seppanen, representative of Finland's Leftist Union in the European Parliament, made a sarcastic remark on this issue: "I understand why Russians wish to circumvent Poland's territory: they are quite aware that gas will be stolen from there, like in Ukraine, for ideological motives". Thus, the above quoted reader of Postimees website is mistaken. Tallinn and Warsaw are going to be widely mentioned in international media as a convenient subject of anecdotes.

But what about the powerful source of global will which Warsaw and Tallinn so much relied upon, regardless of any international conventions? What assistance has Washington provided to its true asset Tallinn?

On September 25, Danske Markets, the largest Danish investment bank, published a review of economic development of Estonia, which did not sound encouraging for Prime Minister Ansip. According to the bank's estimates, Estonia's economic growth is going to decline by 4.5% during the next year not due to Russian sanctions, aroused by its government's own political arrogance, but due to direct effects of the US mortgage crisis on the Estonian real estate market.

Viljar Arakas, executive director of Aro Vara construction company, urges other real estate players to "escape from Estonia as quickly as possible", and to invest, for instance, in Azerbaijan. The term "bubble" has become common in Estonian business media. Younger economists, educated on perfect US textbooks of economics, are addressing the elder "realistic" generation of economic scientists, whom Estonia actually owes its relatively swift transit to economic independence yet before the 1991 declaration of political sovereignty. However, the "realists" can't encourage them. Academician Mikhail Bronstein, once famous for his strategy of "regional economic accounting", blames the incumbent government for "steering Estonia into a political blind alley". Professor Hanon Barabaner, director of Estonian Institute of Economy and Management, admits the possibility of implosion of the real estate bubble, as well as devaluation of Estonian currency.

However, these warnings are carelessly rejected by the current political leadership as well as the forecast of the renowned Danish bank. Prime Minister Andrus Ansip denies existence of any problems of Estonian economy. He is deaf to the arguments of the top managers of Eesti Gas and Silmet Corp., who had been desperately trying to convince him of advantages of partnership with Russia in gas exploration, as well as other mutually favorable projects. He ignores the simple fact that after rejecting partnership with North Stream under an environmentalist pretext, he will have to find acceptable arguments to convince Finland to build a pipeline link across the same Baltic Sea, the bottom of which is supposedly stuffed with explosives.

Refusing to cooperate with Russia and Germany in exploration of the sea bottom, favorable particular for Estonia's own security, the rightist government of Tallinn has dug out three other pits for itself: the crisis at the real estate market, the decline of transit of Russian goods, arousing a massive strike of Estonian railroad company's workers, and the premature increase of gas import tariffs instead of benefits from partnership with the Russian corporation. Eventually, Estonia's population would to bill the government thrice.

Certainly, Ansip & Co. will never admit their fault. Anybody else will be to blame: Putin; Schroeder; Vanhanen; PACE Chairman Rene van den Linden, recently accused by the rightists of a secret economic conspiracy with the Russians (after the head of PACE dared to criticize Estonian neo-Nazis).

 

THE TIME OF ANSWERS

"We have an open economy", Professor Hanon Barabaner sadly explains, in his comments on his forecast of a looming crisis of Estonian currency.

Those who viewed the US political power as a stronghold as everlasting as the US dollar, are going to pay formidable bills with no guarantees of compensation.

Ironically, President Ilves is already become a subject of ostracism from the radical wing of local rightists, who are now blaming him for toadying before the European bureaucracy.

The fruit of openness to global economic winds appeared to be not very sweet. The shadowy side of this much-glorified global system of openness is coming to the surface in frequent reports about involvement of Estonian citizens in drug trade which even resulted in resignation of Estonia's honorary consul in Argentina.

"Isn't our trade surplus so permanently negative because of a too large share of black economy?" a student asks. Professor Barabaner is reluctant to answer this question on his website or, possibly, the answer is erased by a vigilant rightist moderator.

Some answers sound too painful. But these answers will inevitably be there when the reality itself forces Estonians to perceive the world from a different standpoint than in April, when clouds of nationalist hatred rose above Tonismagi hill. When the economic collapse puts the dots over the Estonian "i", personal behavior will be estimated according to its results, and the real essence of human choice will come to the surface. A that time, Arnold Meri, the 84-year Hero of the Soviet Union, now refusing to bend before the haughty young judges, will be recognized as a real hero, and the ethnic Russian werewolf lawyer who is still capitalizing from his hysterical adherence to the allegedly Estonian, actually American geopolitical cause, will be determined as what he is a mutant and a degenerate.

The behavior of petty transit barons, spitting into the hand that feeds them, is hard to perceive calmly. Still, the most reasonable tactics for Russia today towards them, as well as towards the flight-forwards Warsaw twins, is icy patience which does not prevent Russia from helping its friends and treating its foes with the perfectly appropriate weapon of a spicy anecdote. The evidence of the border between good and evil, visible in Estonia clearer than anywhere else, is marking the end of the murky era of transition, and anticipating the arrival of the absolute of truth. This truth about the bankruptcy of globalization will inevitably arrive both in Tallinn and Brussels.


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