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Grigory Pasko: Traveling the Nord Stream

[Editor’s note: the following is a first in the series of new articles from our blog correspondent Grigory Pasko, who has travelled to the north of Russia to follow the proposed route of the North European Gas Pipeline – a controversial project which many say poses a threat to European energy security.]

Russia’s Natural Gas Wealth Inaccessible to its Citizens

An introduction to the story of my recent journey: Moscow-Vologda-Gryazovets-Babayevo-St. Petersburg-Vyborg-Portovaya Bay-Moscow

By Grigory Pasko, journalist Construction of the North European (it would be more honest to call it “Russian-German”) Gas Pipeline, which has now acquired the name NordStream, was planned to begin in the autumn of 2005 and end in 2010. Its creation assumes the laying of a pipe through the Baltic Sea from Russia to Germany with a throughput of 55 billion cubic meters of gas per year. “Gazprom” had unveiled the NEGP project way back in 2002. In the years 2010-2011, it is planned to place the first phase with a throughput of 27.5 billion cubic meters on stream. It is assumed that the NEGP will allow for the transport of Russian gas to Europe bypassing the gas transport systems of the countries of Eastern Europe. Just from this circumstance alone, one can come to the conclusion that the NEGP is more likely a political brainchild than an economic one.

Russian Blog

Russian map of the route of the North European Gas Pipeline

The North European Gas Pipeline will connect the Russian coast of the Baltic Sea in the are of Portovaya Bay (not far from the city of Vyborg) with the German coast of the Baltic Sea (not far from the city of Greifswald). It will be possible to extend a branch of the pipeline along the territory of The Netherlands and beyond – to the English city of Bacton. The length of the North European Gas Pipeline will exceed 1.2 thsd. kilometres. On the whole, the project will cost investors $5.7 bln. «Gazprom» is taking $2.2 bln of this on itself; the North European Gas Pipeline Company (NEGPC), a consortium which will receive management rights to the new gas pipeline after completion of construction, promises to find another $3.4 bln. The management board of this company since only several weeks after his retirement has been headed by former chancellor of Germany Gerhard Schroeder. Representatives of the consortium declare that construction of the NEGP will be implemented with observance of ecological norms and will not disturb the environment of the Baltic Sea. At the same time it is known that conclusions of an environmental impact assessment does not yet exist. In addition to this, there is not a conclusive declaration on the state of the Baltic Sea bed, in which over 300 thousand tons of poisonous chemical substances of the times of the Second World War are submerged. Why is it that this project, with which several countries of the Baltic region have issues, suddenly lurched into high gear and was given a “green light”? Obviously, it’s not just a matter of the personal relations between president Putin and former chancellor Schroeder. It is known that unlike Ruhrgas, which owns around 10% of the shares in «Gazprom», BASF and «Gazprom» are connected by ties of an informal character. The largest shareholder of BASF Wintershall, is the German DresdnerBank, the management board of which from the beginning of the current decade has been headed by Matthias Warnig — the former head of the representative office of the bank in St. Petersburg and a personal friend of Vladimir Putin’s. Based on an assumption of The Wall Street Journal, Mr. Warnig was supposedly recruited by Putin, which is what determined his subsequent dizzyingly rapid business career. Since that time, the bank Dresdner has been methodically carrying out the most sensitive errands of the government of Russia. Thus, Dresdner turned out to be mixed up in the offensive against YUKOS — in August 2003, the Russian Ministry of Justice entrusted the company Dresdner Kleinwort Wasserstein (DrKW) to carry out an appraisal of YUKOS’s key asset, the oil company «Yuganskneftegas», for subsequent sale. As the magazine asserts, “Putin and Matthias Warnig …still continue to meet, sometimes dine together in the out-of-town residence of the president, although not quite as often as had been before.” Before today’s project, «Gazprom» had already twice unsuccessfully attempted to access the European market. The «Yamal-Europe» gas pipeline with an overall cost of over #35 bln intended to start transport to Europe of more than 30 bln cubic meters of gas bypassing Ukraine through Belarus and Poland. After absorbing $10 bln in investments the project turned out to be on the verge of commercial collapse due to the absence on its route of underground gas storage facilities. The second attempt to bypass Ukraine was «Blue Stream» — a gas pipeline with a capacity of 16 bln cubic meters and a cost of around $5 bln, which was laid from the RF to Turkey along the bed of the Black Sea. This project likewise ended in collapse, but for now only commercial — as in the case with «Yamal-Europe», there didn’t turn out to be storage facilities along the route of this pipeline. And now we have the third project, which also may not be implemented in its original form. During the course of a week, I traveled the route of the Russian land portion of the pipeline, from Gryazovets (Vologda Oblast) to Vyborg (Leningrad Oblast) with one aim – to see with my own eyes how the people are living in the places of the “construction project of the century”. What do they think of the project? How are the gasmen working? Before the trip, I contacted the Gazprom press service for help. They refused to help me. I am writing about this in detail not only because I consider the press service team unprofessional, but also because the management of «Gazprom» had promised on numerous occasions: construction of the North European Gas Pipeline will be open for the press. They lied. The way bureaucrats who are Soviet in their essence often (if not always) lie. They make like they’re modern, European, civilized, and open, in practice applying particularly Chekist methods of closedness and falsity to the style of their work.

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Photo of the NEGP pipe (laid underground) in the vicinity of Babayevo of Vologda Oblast by Grigory Pasko

Luckily, the people “on site” turned out to be more open to the press than the bureaucrats in Moscow. It should be borne in mind that it is specifically these people who are doing concrete work – building and servicing gas pipelines. The majority of those who are in Moscow are nothing but freeloaders. And, according to established tradition that has existed in Russia since time immemorial, it is precisely the freeloaders who get the big salaries. By the way, I must admit that it was still a surprise for me to learn that the average salary of a worker in the line-operation service of a compressor station comprises 5 thousand rubles – 200 dollars per month. I have seen how the Germans who consume Russian gas live. They live well. And now I have seen how the Russians who are literally sitting on this gas and yet effectively do not have access to it live. They live badly, in poverty. Why is this so? Could it be precisely because the bosses – all those “top-managers”, as they like to style themselves – are living so well and in such wealth from the gas? Could be. Just like it could also be that my field notes might seem subjective to someone. Don’t forget that I never did get to experience the “sublime pleasure” of being able to visit «Gazprom» facilities or the warm and friendly participation of the gas empire’s bureaucrats in my journey.