October 13, 2006  (the date of publication in Russian)

Konstantin Cheremnykh

GAZPROM: WE'LL KEEP THE SHEEP

Behind Putin's declaration on Shtokmanovskoye

The decision of Russia's leadership to declare Gazprom the only developer and owner of the world's largest deposit of natural gas, the Shtokmanovskoye area on the Arctic shelf, has much encouraged the authorities and industrial managers of the adjacent Arkhangelsk Region, but greatly disappointed the liberal media observers. Their chorus of dissent, however, is out of tune: some foresee that the whole project will be stalled because of a lack of investments from the earlier supposed shareholders; others are irritated with excessive incomes of the Russian gas extracting and trading corporation. Before the media audiences is able to arrive to conclusions of its own, it is promptly being stuffed with a well-ground definition of a short-sighted, unpredictable, and indiscreet manners of the state, as well as the corporation it runs.

Gazprom's partner companies in Germany, where Russia's President expressed the new approach of Russia towards development of the gigantic gas deposit, are not a bit as hysterical as the media alarmists. Firstly, they have got a substantial share in the North European Gas Pipeline; secondly, Germany is now acquiring the role of a distributor of Russian natural gas. This calm in Germany's top business circles is not forgiven by Russian liberals as well. A first-page title "Germany Above All" in Kommersant Daily, literally reproducing the central motto of the Third Reich, attaches a dirty label to the country which dares to have enough courage for a strategic partnership with Putin's Russia.

The President's decision is being sold to the national audience as a sort of a spontaneous whim, a careless arbitrary gesture of an imperial hand: today, I bestow, tomorrow, I'll deprive. Other explanations refer to the same evergreen theory of Russia's brawl with the World Trade Organization, which does not let Russia in (certainly, omitting the question whether Russia really benefits from that entry).

A few loyal economic observers vaguely indicate that Russia, on the example of Sakhalin, has got disappointed with extraction of oil and gas on the production sharing principle, and the disavowal of the original plans for Shtokmanovskoye is motivated with the same considerations. This rings the bell. But it's not the whole story.

Astonishingly, media analysts are completely missing the point of the crucial, strategic Eurasian context of Shtokmanovskoye's "re-nationalization". This context exceeds the sphere of economy.

Days before Putin's arrival in Berlin, on October 6, Prime Minister Mikhail Fradkov was introducing Russia's new proposals in Athens, concerning the Black Sea-Adriatic pipeline project linking Bulgaria's Burgas and Greece's Alexandrupolis. He actually admitted that Russia agreed for a strategic concession, admitting involvement of Chevron, along with its long-time partner in extraction, Kazakhstan's Kazmunaigaz, in the Bulgarian-Greek pipeline. A months before, Moscow was still trying to avoid Chevron's participation, but eventually stepped back – not before Chevron but before the arguments of Nursultan Nazarbayev, with whom Putin met on September 28 and repeatedly on October 7. Between these two meetings, Russia and Kazakhstan struck a deal on joint development of Kashagan oil and gas province and the delivery of the extracted crude product to the Orenburg Refinery (Southern Urals).

This concession to Chevron, which operates in a number of key deposits of Kazakhstan and transports oil via the Caspian Pipeline Consortium to Novorossiysk (Russia's Black Sea coastline), was a result of a compromise with the Greek side as well. The leadership of Greece is hardly encouraged with the example of Hungary – where summit negotiations with Moscow, focused on transit of Russian gas across Hungary, were disrupted with a “media bomb” in Budapest, promptly developing into a massive riot with a pretty symbolical desecration of a Soviet war memorial.

Displaying its reluctance to grant Chevron with a share in Shtokmanovskoye, Vladimir Putin just reminds that even for such an influential company, every day is not Sunday. The deposit is to become the major source of natural gas for the North-European pipeline. Would it make much sense to set that kind of a wolf to keep the sheep, dooming the major gas consumers for a permanently high political risk? Even Chevron's top managers are hardly able to predict the whims of its single shareholder, namely, US State Secretary Condoleezza Rice.

Quite recently, Moscow was rather friendly with one more possible shareholder of the Shtokmanovskoye project – namely, Norway's Statoil. But this company, after a while of hesitation, chose a deal with Warsaw – though hardly at pistol point. The June 2006 framework agreement between Statoil and Poland's PGNIG – the very company which, as Polish press admits, achieved a major share in Lithuania's Mazeikiai Nafta complex with direct promotion from Washington – was too obviously political. Or, frankly speaking, too obviously anti-Russian.

On the eve of Putin's arrival in Germany, the Russian side offered a new transport deal to Warsaw, concerning delivery of condensed gas from Ust Luga (Leningrad Region) via Baltiysk (Pilau). This generous proposal was made despite Warsaw's permanent intrigues against Russia on the EU level, in the Caucasus policy, in the Ukrainian affairs – where Poland had intervened politically, and despite Lech Kaczynski's commitment to transform his country into a military range for the US anti-missile facilities.

Moscow has been generous to Warsaw for years. Long before the final NEGP agreements were reached, Russia proposed to pull two major gas pipelines across Poland, elevating its transit role to an unprecedented level. Poland had an opportunity to achieve an exceptional role of a distributor of Russian gas – both to Central and Southern Europe. Still, Warsaw rejected the deal, ostensibly from reluctance to import additional amounts of gas from the territory of a "rogue" Byelorussia. And today, again, Moscow is facing with the same reluctance, which is nothing but a cover for a sticky, miserable, slavish fear before the US patrons; with a servile masochistic commitment to be used as a tool of geopolitical machinations.

To each his own, to saints the Heaven, as Russia's President recently reminded (though on a different occasion). The contenders for lucrative shares in Shtokmanovskoye, finding themselves out of its ownership, are saving themselves from a whole array of temptations, while the consumers of Russian gas are saving themselves from a whole array of surprises. In case somebody feels like being mistreated, he should ask himself why he had chosen an economic advantage for a humble function of a buffer state.

The infuriated liberal observers still expect that as the Russian leadership – in their view – changes its mind seven days a week, the Shtokmanovskoye issue may eventually be solved in a more pleasant way. Still, the President has said what he said: in case the potential partner can't propose any conditions, appropriate for the Russian side, the talk makes no sense, basta. The talk is not about economy alone. Essentially, the major condition is, and should be since now on, that Russia's energy policy should not serve as an object of untidy manipulation, regardless from the guise of abstract market considerations, as well as abstract human right pretexts. That does not work any longer.

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