Berlin-Moscow Gas Pact Easy to Thwart… if Balts Have Guts

East European countries regard the Russian-German agreement to build a gas pipeline on the Baltic seabed with misgivings. Though it is far cheaper to build an overland pipeline through Lithuania and Poland, the North European Gas Pipeline Company (NEGP) will directly link Russia and Germany, bypassing transit states. The 1,200 km long seabed pipeline from Vyborg to Greifswald will allow Moscow and Berlin to cut off gas supplies to the countries lying between Germany and Russia if they should ever wish to. This has prompted some to compare the NEGP gas deal to the 1939 Molotov-Ribbentrop Pact. In addition to the geopolitical objections there are serious environmental objections to building a pipeline on the seabed.

Last week the Estonian website Syndicate of Common Sense published an article which suggested an easy way to thwart the NEGP.  Estonia and Finland only need to reassert their rights to the Baltic seabed. According to the 1982 United Nations Convention on the Law of the Sea every country has the right to extend its seaborder to 12 nautical miles (22 km) from their shore or outermost island. The Gulf of Finland between Estonia and Finland is so narrow that the countries cannot utilise their maximum 12 mile area without colliding. In this case the border runs right through the middle.

In 1994, however, Estonia and Finland signed a bilateral treaty [pdf] in which they both gave up 3 miles from that middle line, so as to create a 6 mile wide international seaway in the Gulf of Finland: “In the Gulf of Finland, the outer limit of the territorial sea shall at no place be closer to the midline than 3 nautical miles.” This seaway leads to the Russian waters near the city of St Petersburg. That is where the NEGP will start, running on the seabed in the international zone between the waters of Finland and Estonia.

Under the terms of the 1994 treaty both Tallinn and Helsinki can unilaterally revoke the agreement with 12 months’ notice. If one of the countries decides to do so, this would leave the international seaway only 3 miles wide, beginning from the midline on the side of the country that has not revoked the treaty. If the two parties reassert their full rights, the seabed border would again be on the midline between the two countries.

Hence all that is needed to block the construction of the seabed pipeline between Russia and Germany is a diplomatic decision from Tallinn and Helsinki. This would make Estonia and Finland the only sovereign powers over the seabed in the Gulf of Finland. As a result Russia would not be able to construct anything on the seabed without permission or without complying with specific terms.

Though this would be a very straightforward way to block the German-Russian NEGP plans, I doubt whether it will be done. I do not know about Finland, but I doubt whether the governing parties in Estonia have the guts to make such a bold move, which would upset both Russia and Germany, the most powerful EU member state. However, when the issue of the pipeline is raised let no-one say that nothing can be done to force the Germans and Russians to take into account the concerns of the Baltic and East-European nations. The whole project can be stopped with almost no effort– all that is needed is the guts to do it.

More on this topic:

Schröder Exchanges Berlin for Kremlin, 14 December 2005

What has Finland to win by closing the international waters?

It surely didn't give up those claims for nothing. Let's for the sake of the argument assume that Finland kept an open path in the gulf in exchange for good standing with Russia (an important partner).

So what does Finland gain by closing that gap again to offset the loss of the aforementioned benefit?

A link with a timeline

I worked up a timeline of news and commentary concerning this deal, and I have some good links, over at my blog. Check it out here if interested.

Of note is the fact that Schroeder-aligned Gazprom won a lucrative contract to develop Iraqi oil fields in 2002. That goes a long way in explaining Schroeder's opposition to the US war in Iraq.

Not that I ever considered Gerhardt's anti-war stance as particularly moral or convincing, but I am even less inclined to take him seriously given the vested interested in Gazprom and his business relationship with the state-owned Russian oil giant.

Wouldn't it be more

Wouldn't it be more interesting for these two countries to wait until the pipeline is constructed before reasserting their rights to the gulf seabed?

What I don't understand is

What I don't understand is why should the NEGP be considered so dangerous in the first place? Of course there are enviromental conserns, but how about political conserns? Surely gas supplies to Eastern European nations can be cut off right now as it is.

Being a Finn, I also don't understand why should we object to Russians selling their gas - which is theirs to sell anyway.

Russian gas

The most intriguing question is why the Russians (and Germans) absolutely want to transport their gas via a seabed pipeline, which is longer and far more costly to build than building a new line next to an existing line running through Poland?

Risk assesment

Simply put if that gas goes over land that gives for example Poland bargaining power over a strategic German/Russian investment. I am not private to the particalurities of this venture but it could be that the associated risks are too costly.

Reasons for NEGP

Probably, the reason is in the first place an economic one, rather than a political one. A particularity of the Sovet era that is still in effect (be it not for long anymore) are the artificially low energy prices (also for gas) throughout the former USSR countries (including Eastern European countries like the Baltic states, ...). In 2004, domestic gas prices (to industrial users) were on average only $30 per thousand cubic metres, while world market prices on average were around $140 (!) per thousand cubic metres of gas.

Today, Russia is still in a process of economic transition from a centrally planned to a market driven economy. Therefore, it is - as a part of this transition - trying to gradually increase these low energy prices to a world market price level. Neighbouring ex-USSR countries (such as Belarus and Ukrain) are indeed affected by this, but so are the end consumers in Russia (!).

This gap between domestic and world market prices makes that 70% of Gasprom's revenues are generated by only 30% of its sold gas volumes (being Gazprom's exports). Moreover, transiting gas through other countries comes at a cost: transport fees have to be paid per km and cubic metre of gas that is transported. This results in a higher gas price down the pipe (i.e. Western Europe). From this picture it is clear why the Russians are so eager to sell their gas directly on the Western European market.

Of course, there is certainly also a political aspect to the construction of a direct link between Russia and Western Europe: (i) A policy of cutting the subsidizing of gas supplies creates resistance in (former USSR) gas transit countries. However, in my view, this resistance is not the main reason for the Russians to construct the NEGP. As I already argued, the main reason is an economic one. Everything should be seen in the light of one strategy: "selling Russian gas directly on the European market". The NEGP is only one aspect (be it an important one) in this strategy. In parallel, the construction of several gas storage sites (underground) throughout Western Europe is a key building block in the Gazprom strategy. Underground gas storage acts as a buffer (gas reserves for winter) in case things go wrong logistically (in the transmission network or due to political instability); (ii) That the Baltic states express their concern on the construction of the NEGP, is understandable, but nevertheless driven by an ungrounded fear. Since their negative Soviet experience, the Baltics perceive the Russian bear as a threat, even after EU membership. All actions they take vis-à-vis Russia and the Russians are driven by self-protection (cfr. the treatment of Russian minorities in the Baltics). I guess it will just need some time and common sense to overcome this fear and deal with Russia as any other political and economic partner in the international arena.

Comment by Philip Vanheessen

Thank you Philip!

Finally I'm reading here an interesting comment. Travelling myself often to the Baltics I think that the article written by Martin Helme indeed shows that 'the Baltics perceive the Russian bear as a threat, even after EU membership'. Which is a pitty...

Why the Baltics don't look forward to the future and to the great economic possibilities which an enormous market like Russia can bring them? Germany is...

Russians, Gas, Lines,

I find it a pitty that Russia finds itself threatened. Thing lads & ladies...I'm guessing Russia wants to protect its interest from any possible Baltic intervention because of their treatment of Russians + Kaliningrad (bridging with Germany; perhaps why the German part) and most likely to prevent a likewise situation such as in the Ukraine to happen. There's a conflict brewing on the usage of the Ukraine's lines for Russian gas(*).

sorry to interrupt, but has

Sorry to interrupt, but has anybody looked at the map?
Estonia and Finland seem to have nothing to do with any land-based pipeline. They would go through Poland as was rightly mentioned in the article.
Why would they piss off their most powerful neighbours?
Does anybody here have a different agenda. If so, say so.
Merry Christmas anyway :-)

There is a problem with

There is a problem with landlocked Kaliningrad and there is also the treatement by the Baltic states of the Russian minority. Those form problems for Russia and a land pipeline.
Belarus is a dictatorship wont remain stable forever, thus forming a problem for a land pipeline. Certainly with growing pressure against Russia, such as what happened in the Ukraine.
Let us not underestimate the Russian fears towards NATO & the US tearing down Russia's close border-allies.
Doubt the Baltics and Finland will form a problem.
Russia & Finland fought a war; whats the impact of that ?

Russia - Finl

Brigands, the Russian-Finnish war has nothing to do with it. Their mutual relations are currently quite good, certainly with respect to trade: Finland is Russia's third biggest trade partner and Russia is Finland's eighth biggest.

Perhaps because they have

Perhaps because they have problems with the Baltic states and their treatement of Russians.
Russia is also a bit nervous because NATO is creeping up towards them. Typical Russian reaction of 'fear'. Seems it has found a European ally in Germany, perhaps to strengthen its position towards the EU and the Osterweiterung? One thing bounds them: Kalinningrad or Köningsberg.
Perhaps the main gasline will be -eventually- extendable towards other European regions (Scandinavia & Eastern EU). It seems to be a safer solution and wont suffer any possible criminality problems.
I remember something abt talks between Belgium & Putin on storing Gas and making Antwerp a main Russian Gashub. A Bit like the St Petersburg policy, a shift towards Europe but in a more assymetric manner (perhaps).

Why a sea route?

Maybe that way there's fewer politicians they'd have to bribe (or share with, from Schroeder's point of view)

Berlin-Moscow Gas pact

Do newborn eastern-european states have the RIGHT to get Russian gas at any amounts they want and for whatever price they want? If they cannot exist without russian supply, what sort of independent states are they? You europeans are so consceded, that you don't see the real threat, when everyone predicts death of Europe. It would be funny, if it were not so sad.