15. RUSSIA WIELDS ITS NEW ARSENAL: FUEL

Poland is among the energy-hungry nations to the west confronting
what some analysts call Moscow’s politicized agenda in making deals.

By Jeffrey Fleishman, Times Staff Writer
Los Angeles Times, Los Angeles, California, Friday, Dec 30, 2005

WARSAW – ­ In the crowded hallways of the Polish Parliament, there is
talk of a new Cold War in which the weapons have changed from nuclear
warheads to oil and gas.

The rival in a widening game of pipelines and corporate strategy is Russia
and its empire of energy resources. Ninety percent of Poland’s oil and much
of its natural gas flow from Russia. Such equations are distressing for
Poles as they rise in stature in the West while remaining in many ways
subject to the political and economic whims of their past oppressor.

“Russia is exploiting its control of oil and gas as part of its foreign
policy,” said Jerzy Marek Nowakowski, a former national security advisor.
“This is an extremely dangerous political instrument. Oil and gas are more
effective for Russia today than its nuclear weapons were during communist
times.”

The quest for energy resources in Poland and throughout Europe is unfolding
in tales of untapped reserves, frozen outposts and labyrinthine financial
deals involving historical foes and new world alliances. Since the Cold War
ended 15 years ago, resource-rich Russia has become crucial to a continent
wary of the political chaos and unpredictable markets of the Middle East.

The changes across Eastern and Central Europe, especially the democracy
movements in the former Soviet bloc, are politicizing the dynamics of
energy distribution. Many analysts and legislators say Russia’s agitation
over democracy’s eastward expansion, and its long-standing unease with the
North Atlantic Treaty Organization at its borders, has persuaded Moscow to
exert power through oil-and-gas diplomacy that rewards friends and punishes
foes.

Such a policy, especially if it led to price increases or cuts in service,
could be disastrous for the fragile economies of Poland, Ukraine and other
nations trying to slip further past Russia’s shadow. This week, Russia’s
state-controlled Gazprom natural gas monopoly threatened to cut off service
to Ukraine on the first of the year if Kiev did not agree to higher prices.
Russia supplies about one-third of the former Soviet republic’s natural
gas, and Gazprom has proposed hiking rates from $50 per 1,000 cubic
meters to about $220.

Higher prices would put Ukraine more in line with rates worldwide, but an
immediate fourfold increase would stun a nation whose costs have been kept
low because of its former ties to Moscow.

Russia informed the Polish government in early November that it would
dramatically raise natural gas prices in 2006. With 18% unemployment and an
economy struggling to modernize, Poland would risk recession if energy
costs escalated too quickly.

Russia and the U.S. have crucial political and energy interests in Poland
and countries to the east and south. Moscow and Washington are competing
for influence with governments from Eastern Europe across the Caucasus and
in the oil capitals of the Caspian Sea region. Polish politicians say
Warsaw’s close relationship with Washington should help in its pursuit of
energy sources to reduce its dependence on Russian oil and gas.

Moscow’s grip on the Polish market was strongly felt in September, when
Russia and Germany signed a $5-billion deal for a natural gas pipeline to
run under the Baltic Sea. The pipeline will bypass Poland and the Baltic
countries and give Russia access to new markets. Polish political leaders
compared the deal to the 1939 Hitler-Stalin nonaggression pact and
complained that Russia could play political blackmail.

The pipeline is an “attempt by Moscow to divide the European Union by
bypassing Poland and other Central European countries,” said Marek Jurek,
speaker of the lower house of Parliament. “Russia needs to accept that old
Soviet bloc countries are now part of the EU. It has to accept that these
changes are permanent and not revert to the revisionist tendencies of a
fallen empire.”

Relations between the nations are at their worst point in years. Former
Polish President Aleksander Kwasniewski suggested that Russian President
Vladimir V. Putin’s gas deal with Germany was punishment for Warsaw’s
support of the democratic revolution in neighboring Ukraine. Russia is also
irritated by Poland’s new right-leaning government and its close ties to
the U.S.

The mood already was strained in July, when Moscow accused Polish
politicians of stoking anti-Russian sentiment that led to the beatings of
three children of Russian envoys in a Warsaw park. Weeks later, two
Polish diplomats and a journalist were attacked in Moscow.

Polish newspapers have swelled with commentary that Putin, a former KGB
intelligence officer, is mired in the conspiracies and geopolitics of the
past.

“I can’t remember such practices against diplomats, even in Berlin when
Hitler was in power,” Jaroslaw Kaczynski, leader of the Law and Justice
Party that controls Parliament, told the Polish media. More ill will
surfaced Nov. 4, when Russia celebrated a new holiday: the anniversary of
the 1612 uprising that drove the Polish army from Moscow after years of
occupation.

Poland is finding that the pipelines of today are as potent as the armies
of the past. The 720-mile conduit to be built by Gazprom and two German
corporations strategically cuts Poland out of a sprawling energy grid.
Russia had planned to complete the second leg of a pipeline through Poland
to reach markets in the West. This would have allowed Poles to collect
millions of dollars in transit fees, which will be lost to the
Russian-German project that began construction this month.

Poland has raised the “biggest ruckus,” Sergei Kupriyanov, deputy head of
Gazprom’s information policy department, said in a recent interview. “Its
rationale is simple, that the construction of such a pipeline on the
[Baltic] seabed rather than on land through Poland deprives it of possible
profits.” He added that the German deal gave Gazprom better links to a
wider consumer market in the West.

Some analysts see a more veiled hand at work. “Russia’s current government
is pathologically incapable of speaking to the countries of the former
Soviet bloc as equals,” said Vladimir Milov, president of the Moscow-based
Institute of Energy Policy. “It wants to be a big brother and dictate its
terms.”

Milov said that bypassing Poland was “extremely unsound economically”
and was done for the “sake of political objectives.” He said politicizing
energy policy risked destabilization of the market.

The German-Russian deal also underscored the European Union’s lack of an
energy security policy for its 25 members. The EU seeks to have its members
act in unison, ensuring that one nation does not hurt another. Negotiations
for the new pipeline showed that Berlin, desperate for cheap energy to
invigorate its economy, put national benefits over the interests of its EU
partners to the east.

It illuminated how energy needs often become the driving force of politics.
Former German Chancellor Gerhard Schroeder and Putin had grown close,
and Schroeder was often criticized in the media for not condemning
Moscow’s military campaigns and human rights abuses in the separatist
republic of Chechnya.

Analysts in both nations viewed the pipeline deal as partly a reward for
Schroeder’s reticence. The lucrative pact was signed when Schroeder needed
it most ­ 10 days before the election that nevertheless failed to win the
chancellor a third term.

“There’s clearly a concern on the part of some EU countries that one or two
countries temper their comments about Russia because of their energy
dependency,” said Stephen O’Sullivan, co-head of research for the United
Financial Group in Moscow.

Schroeder’s relationship with Putin was further scrutinized this month,
when it was disclosed that the former chancellor had been appointed to head
the shareholders of the consortium overseeing the pipeline’s construction.
It was not announced what sum, if any, Schroeder would be paid in the post,
but several German politicians have complained of a conflict of interest.

Antoni Podolski, deputy director of the Center for International Relations
in Warsaw, said: “Schroeder taught us a painful lesson. He showed us how
not to be naive and to act in the national interest. Sometimes we Poles are
too naive, and we believed too much in European solidarity. But because of
the unstable Middle East, Western Europe likes Russian oil and gas even if
this policy is a threat to Poland.”

Recent history shows, however, that Russia is not shy about reminding its
neighbors that it controls much of Europe’s energy flow.

At the October EU-Russia summit in London, Putin pointed out that Russia
provided 90% of some Western countries’ natural gas. “No one’s complained
so far,” he said.

The president added that new energy projects would allow Europeans to
“control everything from production to the final consumer.. This creates a
completely new situation. So the rumor of Europe’s possible loss of its
independence in terms of energy is hugely exaggerated.”

Disputes over prices and politics have led to disruption of the natural gas
supply in the past, however. In 1992, Moscow severed gas supplies when
Lithuania ran afoul of Russian political interests in the region. The
hardships that ensued helped the Communists make a stunning electoral
comeback.

More recently, in October, the Lithuanian government briefly detained a
Russian pilot whose fighter jet crash-landed on its territory. Russian
protesters marched to the Lithuanian Embassy in Moscow, carrying signs
that read, “No Pilot, No Gas.”

Poland is looking for new energy sources, although it will remain dependent
on Russia for years. They include the possibilities of imports from Norway
and Iran and tapping into the $3.4-billion Caspian Sea oil pipeline that
will begin in Azerbaijan and bypass Russian territory to supply Western
markets.

“We have to coordinate with U.S. companies,” said Nowakowski, the
former Polish national security advisor. “There are possibilities opening in
Kazakhstan and gas fields in Turkmenistan.” -30-


Times staff writers Kim Murphy and Natalia Yefimova in Moscow and
special correspondent Ela Kasprzycka in Warsaw contributed to this report.


Link:

Advertisements

Leave a comment

Filed under Uncategorized

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s