Posted on 05/27/2007 2:31:00 PM PDT by Tailgunner Joe
Which building in Europe has the greatest potential power over Britain's citizens?
Is it the House of Commons or 10 Downing Street?
Or is it the European Parliament? No.
It is this towering office block shelled in blue glass and topped with a pyramid. In ten years' time, its occupants will be able to make all Europe tremble.
For this is the corporate headquarters of Gazprom, Russia's monopolistic gas giant.
Europe currently gets a quarter of its energy from natural gas, and this is predicted to increase to 30 per cent by 2016.
Already Europe is heavily dependent for this on Russia – which means on Gazprom. Some EU states such as Slovakia and Bulgaria get all their gas from Russia, while Germany gets 43 per cent and France takes 27 per cent.
Both those figures will increase dramatically as Gazprom's new Baltic Sea pipeline comes on line and as Western Europe's natural gas reserves dwindle fast, especially Britain's.
Unlike oil, natural gas is transported in fixed pipelines, so there is little opportunity for short-term switching of suppliers.
Already highly dependent on Russia, the EU is now moving into a position where inside ten years any interruption of Gazprom supplies, particularly in winter, would be devastating.
By 2016 Gazprom, which currently controls 16 per cent of the world's gas reserves, will be able to cause more damage than the Red Army could have done short of nuclear war, just by turning off the taps.
In a week when Russia has again flexed its muscles and refused to extradite Andrei Lugovoy, Scotland Yard's chief suspect for the murder of Alexander Litvinenko, the dangers of Gazprom's power could not be clearer.
On the face of it, Britain is better placed than most of the EU because very little of our natural gas comes from Russia and we have entered long-term contracts that tie up most of Norway's production.
But does anybody believe that, with Europe in chaos and essential services and industry short of power, both the UK and Norway could resist the political pressure to share out the available gas?
In fact, the UK is especially vulnerable because such a high percentage of our electricity is generated from natural gas.
Anyway, we are strategically and economically dependent on Europe, which takes half our exports. Chaos there would knock our economy sideways.
Gazprom's central tower is in a massive, heavily guarded compound in suburban Moscow, and getting in is more difficult than crossing many international borders.
There is a 12ft fence, razor wire, and a small army of armed guards, with rigorous document inspection for visitors.
Eventually I am ushered into the very grand room of Sergei Kuprianov, Press spokesman for the chairman of Gazprom.
He looks young and sharp in his well cut silk suit but his manner is curious for a Press spokesman: he is arrogant, even combative.
I start by asking whether Gazprom is considering alternative, carbon-friendly technologies because of concerns over global warming.
Fortunately, public opinion in Russia has no interest in such matters,' he says brusquely.
I then ask if Western Europe should worry about its increasing dependence on energy supplies from Gazprom.
Not at all', he says, this is a commercial transaction guaranteeing security of supply. We are committed to long-term contracts. This is normal business.'
But normal business is the last thing Gazprom is involved in.
The company is perhaps the most important weapon in President Putin's armoury and he keeps a close eye on it.
The chairman of Gazprom is Dmitri Medvedev, First Deputy Prime Minister; a close Putin ally and his potential successor. The Trade, Energy and Foreign Ministers are all represented on its board.
Gazprom has been the instrument by which Putin has reasserted Russian hegemony over the former Soviet Union, blackmailing former Soviet countries by cutting off energy supplies in winter and buying up Central Asian countries by taking over their economies.
The company is also key to Putin's harsh internal control. Kuprianov often appears on the nation's TV screens, which is easily explained. A year after taking power, Putin decided to stamp out independent media in Russia.
When the only independent national TV channel was closed down in 2001, it was Gazprom Media which took it over and turned it into a propaganda arm of the Kremlin.
Gazprom went on to buy up Russia's two large independent national newspapers. The last significant remaining one, Kommersant, was bought personally last November by the sinister Uzbek oligarch Alisher Usmanov, chairman of Gazprominvest Holdings.
The Editor-in-Chief was immediately sacked while the defence correspondent, Igor Safronov, mysteriously fell to his death from a window three months later.
Gazprom now controls a whole raft of formerly independent media outlets encompassing TV, radio and newspapers, all faithfully echoing the Kremlin line.
The era of free speech, ushered in by Mikhail Gorbachev through glasnost and perestroika, is now over.
As I reported last week, there are two elements to the oligarchy in Putin's Russia. The first is the Russian Mafia, which was in an exclusive position to benefit from the incredible fortunes to be made from Russia's flawed privatisation programme.
Putin has legitimised and co-opted them in return for their unwavering political support. The second element is made up of Putin's own people; members of the KGB and former security services.
The leading Russian social expert, Olga Kryshtanovskaya, has calculated that 58 per cent of senior officials under Putin are drawn from the security services, compared with just five per cent under Gorbachev.
This month Alexander Lebedev, who co-owns with Gorbachev one of Russia's few remaining independent newspapers, Novaya Gazeta, told the BBC that the huge fortunes of Russia's billionaire businessmen are smaller than the incredible secret fortunes built up by Putin's corrupt ministers.
Lebedev, himself a billionaire banker, oligarch and an MP from Putin's own party, named the Russian Minister for Social Security as perhaps the richest.
The effects are obvious. In mid-April, Garry Kasparov, former world chess champion, attempted to lead a peaceful march of 2,000 opponents of Putin. They were surrounded by 9,000 heavily armed riot police who violently broke up the crowd.
Last weekend there was a minor diplomatic spat at the EU-Russia summit in the Russian city of Samara as German Chancellor Angela Merkel complained that Kasparov and a few supporters had been detained at Moscow airport and prevented from coming to demonstrate at the summit.
Putin dismissed Kasparov as marginal' and went on to ask: What is pure democracy anyway?' He certainly does not seem to understand that it is a system in which minority views are not repressed.
He has also waged a ruthless campaign to eliminate any major independent players from the Russian economy. Shell's purchase in 1994 of a half stake in the massive Sakhalin 2 oil and gas project – the largest in the world – was hailed as the great breakthrough for foreign investment in Russia.
After seven years of harassment and obstruction, Shell was finally forced to sell its stake for a bargain £3.7billion. The buyer? Gazprom, naturally.
When I ask Kuprianov if this means foreign investors are no longer welcome in Russia, the reply made me sit up: Russia no longer needs any foreign investment. Back in the Nineties we lacked capital and expertise. Now we have plenty of both.
'We don't need foreigners taking advantage of our resources. Russia will develop its raw materials itself.' Ouch. Recently BP has been under similar pressure over its TNK-BP Russian joint venture. I confidently predict Gazprom will take that one over, too.
BP also had the temerity to bid for some of the assets stripped from Putin opponent Mikhail Khodorkovsky's Yukos group.
Not surprisingly Gazprom won, in auctions far from transparent.
Merkel's chiding of Putin was a welcome breakthrough in straight-talking on the situation in Russia, yet it is Germany that has been most keen to base European energy on gas supplies from Russia.
The key development in this is the Nordstream project, a £4.5billion joint venture owned 51 per cent by Gazprom and 49 per cent by German groups BASF and EON to bring a huge pipeline straight into Germany from Russia via the Baltic Sea.
A prime motive for the route is political: to avoid the need to pass through Poland and the Baltic States, which remain from bitter experience deeply distrustful of Europe's growing dependence on Russia.
Kuprianov says Gazprom's plan is gradually to double gas supplies to Western Europe over ten years. Nordstream, and a southern pipeline through Turkey to Italy, are key to this.
Nordstream is certainly high-powered. Its chairman is Gerhard Schröder, who took this highly paid position immediately on retiring as German Chancellor, in which position he had secured German government backing for the scheme and the necessary commitments to long-term purchase contracts.
For Schröder to commit Germany to massive dependence on Russian energy supplies, and then move so quickly to join the project, raised rather fewer eyebrows in Germany than might have been expected.
So how far does Europe trust Putin, and his successors? With the media almost completely under state control, freedom of speech heavily curtailed and all opposition parties effectively banned from elections, at least we appear to be finally twigging that Russia is not a democracy, although the British Government has been remarkably reticent in noting the fact.
The murders of Alexander Litvinenko, journalist Anna Politkovskaya and scores of other media workers, should make us wary of the ruthlessness of the Russian authorities.
So should the viciousness of Putin's attack on Chechnya, which cemented his popularity and his position at the shaky start of his Presidency.
It was not only Politkovskaya and Litvinenko who believed the Russian security services carried out the bombings of apartment blocks in 2000 which justified that attack.
I personally read reports from our embassy in Moscow which took it very seriously indeed. And highly respected Russia expert David Satter wrote in his book, Darkness At Dawn: Both the logic of the political situation and the weight of the evidence lead overwhelmingly to the conclusion that the Russian leadership itself was responsible for the bombings of the apartment buildings.'
The Russian leadership are completely ruthless: Europe should avoid dependence on them at all costs.
In Moscow one evening, I asked for a bottle of Georgian wine with my dinner. I was stunned that there was none: Russia has imposed a trade blockade on Georgia over a variety of political disputes and it has caused massive hardship.
Russia will impose these blockades at the drop of a hat. It has at various times in recent years cut off gas to Ukraine, Georgia, Belarus and Armenia, while its client state Uzbekistan has cut off gas to Kirghizstan and Tajikistan.
These blockades have usually been imposed in winter, deliberately causing enormous hardship.
They have been motivated by a variety of disputes.
Turning off the Gazprom gas taps is therefore an established ploy of Russian foreign policy.
To date, Western Europe is not yet dependent enough for the weapon to be quickly effective, but that is changing, and there is a notable long-term deterioration in diplomatic relations between Russia and the West.
Some argue we need not worry as it would not be in Gazprom's financial interest to halt supply.
That presumes Gazprom to be a normal commercial venture, which it is not. Russia has built up substantial foreign reserves and these will continue to grow for the forseeable future.
It could survive a gas standoff, particularly as its people are more inured to hardship than Western Europeans. To imagine Europe will not have a security problem because Gazprom would lose money is naive in the extreme.
Of course, it is not necessary for such a threat to be used for it to be effective. Europe's dependence on Russia could just lead to a policy of meek subservience.
David Clark, whom I knew as a Foreign Office special adviser and who is now chairman of the Russia Foundation, said last month: I do not believe in the Pearl Harbour scenario where Europe suddenly becomes completely dependent on Gazprom and the Kremlin shouts “Gotcha”.
I do believe there is a process . . . going on under which European politicians will realise it is not in their interests to get on the wrong side of Russia.'
Tony Blair may go down in history as the most stupid man ever to have control of British foreign policy. He saw a terrible danger to the UK from WMD in Iraq, where there was none, while he has been completely indifferent to Europe's drift into energy domination by Russia.
In April 2006 Gazprom entered into talks with the aim of buying a major stake in Centrica and British Gas. It was reported on April 26 that Tony Blair had decided there should be no attempt to block this. The next day a No10 spokesman clarified that Blair thought it was a matter of free trade'.
Amid general incredulity that Blair believed Gazprom practised free trade', George Soros, the billionaire financier and philanthropist, contradicted him, pointing out that Europe was relying on a country that does not hesitate to use its monopolist power in devious and arbitrary ways.'
What can Europe do? One solution is to obtain alternative supplies of natural gas. The only viable major alternative sources are in the Caspian and Central Asian regions.
But at present gas from these regions can reach Europe only through Russia itself, and thus is controlled by Gazprom.
There has therefore been great Western interest in building a pipeline bypassing Russia, either through the Caspian region to Turkey or Greece or through Afghanistan through Pakistan to the Arabian Sea. The United States has put a great deal of muscle behind this efforts.
But the Caspian pipeline would have to pass through Azerbaijan and Georgia. Massive Russian pressure has been brought to bear, including cutting off energy supplies.
Again, Kuprianov of Gazprom was brutal in replying to me about these proposed pipelines: I would like to see who in that region would dare to die with the US!' he snorted.
Gazprom's other tactic has been to secure for themselves the gas reserves of Central Asia. Turkmenistan, with a population of only 5.5million, has the world's third-largest reserves of natural gas.
A fortnight ago Putin signed an agreement with Turkmenistan to expand a pipeline and massively increase the transit of Central Asian gas through Russia.
Key to this triumph has been Alisher Usmanov and his Gazprominvest Holdings. This subsidiary is the channel for massive slush funds. In November 2004, for example, a payment of £44million to Gulnara, the daughter of President Karimov of Uzbekistan, secured that country's gas contracts for Gazprom from under the noses of the US.
In return for the cash, Putin instructed Karimov to kick out a US military base that dominated Central Asia, and Gazprom secured the strategic kingpin to dominate the Central Asian and Caucasus gas reserves.
Usmanov has become close to former German Chancellor Schröder through the Nordstream project. Analysts believe this has sparked a determined drive by the Schroeder's political allies to persuade the EU to remove sanctions against Uzbekistan.
These sanctions were imposed following the Andijan massacre in which 700 pro-democracy demonstrators were killed by Karimov's troops in May 2005. It also appears to explain a waning of German support for the rival Caucasus pipeline project.
I ask Kuprianov what precisely are the roles of Schroeder and Alisher Usmanov within Gazprom. Again, he is surprisingly candid.
Herr Schröder is chairman of Nordstream. His role is to use his influence with European governments to persuade them to support the Nordstream project and to remove political difficulties. Alisher Usmanov is not connected to Gazprom, but to a subsidiary, Gazprominvest Holdings. Mr Usmanov's skills as a financier are well known. He devises vehicles for handling our most difficult and sensitive financial transactions.'
I had known from my own intelligence sources while British Ambassador in Uzbekistan that Usmanov was in charge of Gazprom bribery and slush funds. I had not expected Kuprianov to come so close to saying it straight out.
That leaves only one option for Europe if it wishes to avoid client status. It must drastically reduce its dependence on natural gas, particularly for electricity generation.
We need to look around for those energy sources in which we are self-sufficient, particularly our winds, our streams, our waves and our tides.
We need to increase the effort we put into developing these renewable energy resources, and do so massively, beyond recognition. And we need to do so in the acceptance that it may be expensive. It is the cost of our security.
Traditionally we have been prepared to pay that cost in armies and weapons. We have to accept that in the coming century energy security must be a major priority, and we must urgently enhance our self-sufficiency.
Gazprom has emerged not only as the monopoly supplier to Europe of Russian gas, but of Caspian and Central Asian gas too.
This represents a much more fundamental and credible threat to Europe than Islamic terrorism or North Korean nuclear weapons, but has received far less publicity.
Russia is strutting with a new arrogance on the world stage; let us retain our ability to thumb our nose when we wish.
Another point for Europeans to try to wean themselves off oil and natural gas—besides being rabidly anti-global warming. Sweden is already close to not using petroleum. It gets its energy from other sources.
Gosh, THEY’RE selling US (the Brits) the rope....er, the gas. Old Lenin would be proud of his protege Vlad.
Bump, good report, thanks.
I sure hope the Brits are seriously preparing. I am shocked the recent gas shut-offs haven’t gotten mre press. It is absolute evil in the Kremlin.
Oh I’m sure the French will rescue them.
Of course, when the Russian population gets down to the point where the Chinese are able to lop off a big part of the Russians' territory, they may not be able to secure any military help, especially from us (the Europeans have almost none to offer). Screw them.
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