November 14, 2012

Nord Stream: Pipelines That Are Making Waves

Russian President Dmitri Medvedev addresses guests during an inaugural ceremony for the first of Nord Stream's twin 1,224 kilometre gas pipeline through the Baltic Sea, in Lubmin November 8, 2011. When fully operational in late 2012, Nord Stream's two lines will have the capacity to transport 55 billion cubic metres of Russian gas a year to the EU for at least 50 years. AFP PHOTO / JOHN MACDOUGALL
Russian President Dmitri Medvedev addresses guests during an inaugural ceremony for the first of Nord Stream's twin 1,224 kilometre gas pipeline through the Baltic Sea, in Lubmin November 8, 2011. When fully operational in late 2012, Nord Stream's two lines will have the capacity to transport 55 billion cubic metres of Russian gas a year to the EU for at least 50 years. AFP PHOTO / JOHN MACDOUGALL

Extensive environmental and security analysis is a prerequisite for yet another pipeline project.

Extensive environmental and security analysis is a prerequisite for yet another pipeline project.

It was five years ago to the minute that the Estonian government rejected Gazprom’s request to carry out marine surveys, thereby opposing the construction of pipelines in the Estonian exclusive economic zone (EEZ). Estonia’s main motivation for doing so was the sensitivity of the Baltic Sea environment, but also security risks and the need for caution with regard to Russia’s initiatives after the Bronze Soldier riots. Back then, the other Baltic states and Poland shared Estonia’s views – they all thought that the laying of pipelines would be dangerous not only because of environmental, but also political and security considerations.
The initial attitude of our Nordic neighbours towards the Russian-German pipeline project was sceptical due to the absence of any precise impact assessments. Besides, the European Union had not yet developed a common approach to the issue. However, Finland, Sweden and Denmark eventually decided in favour of the project, giving the green light to surveys and construction works.
In 2010, Nord Stream AG laid the first of the planned two pipelines on the Baltic seabed. It started transporting Russia’s valuable gas directly to Europe in September 2011. The second pipeline was completed in April 2012 and is expected to become operational in October this year.
Now Gazprom has decided to further expand its pipeline network under the Baltic Sea as analysts estimate that the demand for gas in Europe will increase by almost 43% by 2030. The Russian gas giant intends to construct two additional pipelines in the Baltic Sea, taking different routes. However, the degree of accuracy of the forecast about Europe’s rising gas demand and Russia’s ability to fill the pipelines with gas will require more in-depth analysis. In addition, it may prove worthwhile to keep an eye on a recent controversy between the European Union and Gazprom over allegations that the latter may be abusing its dominant market position.
On August 22, Nord Stream AG’s representative, the Sorainen law firm, submitted a request to the Estonian Ministry of Foreign Affairs to conduct preliminary surveys in the Estonian EEZ; the company expects an answer already by December this year. The surveys in the EEZ would involve an up to 4 km wide corridor located outside Estonia’s territorial waters. They are necessary for designing the pipelines and for making preparations for their environmental impact assessments.
What criteria should guide the Estonian government in its decision-making process this time? It seems that the previously unanimous opposition to the pipelines has now become less pronounced, although environmental experts still emphasise the hypersensitivity of the Baltic Sea ecosystem and admonish those responsible not to repeat their past mistakes. The prime minister has no reason to change the negative decision because – from Estonia’s perspective – it will have no impact on national energy security or relations with Russia. In addition, it is thought that the same general security arguments apply as five years ago. On the other hand, pragmatic statements are made ever more frequently in the Estonian media to play up economic and business interests and also to recognise the positive aspects of the pipelines. After all, Nord Stream has been backed by our Nordic neighbours and the European Union – it is therefore a completely legitimate undertaking!
It would obviously be rash to assume that a positive response to the survey request would improve Estonian-Russian relations. Nord Stream clearly is not a PR project for Russia, but rather an instrument that facilitates its return to its traditional area of manoeuvre.
Already 100% reliant on Russia for natural gas, Estonia indeed would not solve its energy dependency problem by sanctioning the installation of additional pipelines in its EEZ. Rather the opposite: by agreeing, Estonia would in a way give its consent to Russia being Europe’s only gas supplier, which in its turn would weaken a political argument crucial to Estonia among others – the argument that energy sources should be diversified to improve energy security.
Moreover, if permission were granted and Estonia joined the pipeline project, this would in the long-term perspective offer Russia a justification for increasing its military presence in the region with the purpose of monitoring or defending strategically important infrastructure with naval vessels or helicopters. In addition, the possibility cannot be excluded of military exercises being conducted in the immediate vicinity of Estonia on the basis of a scenario involving the protection of the pipelines.
If a precedent for the construction of one strategic facility were established, this could stimulate the desire to build more facilities related to the first one, hence making it more difficult to reject the requests to do so.
It really seems that all the above arguments are grave enough to warrant Estonia not to reconsider its previous decision. However, so as to base its decision on very well reasoned arguments, the Estonia government should this time thoroughly analyse all the risks and at least attempt to find some aspects highlighting the positive side of the surveys, regardless of its final decision.
It would be in vain to expect rapid improvements in our relationship with Russia, but this does not mean that a gesture of ‘goodwill’ would be completely pointless because it could give Estonia – due to our EU membership – some credit in matters Russia considers significant. Russia needs partners to step up its modernisation efforts and these partners lie in the West, especially in Northern Europe with its balanced economies and technological advances.
From the perspective of energy security, everything will doubtlessly stay the same for Estonia. Still, the most plausible scenario is that the additional pipelines will then be laid in the Finnish EEZ, which will also maintain the status quo.
Economic aspects must definitely be taken into account during the decision-making process which has also been stressed by business representatives. If gas pipelines cross the Estonian EEZ, we have the right to ask transit or lease fees the amount of which would naturally depend on pipeline lengths in our territory. It would also be possible to seek compensation, to require infrastructure to be modernised or to claim funding for related additional projects which could create new jobs.
As for the potential need to protect pipelines which could motivate Russia’s increased military presence in the region, Estonia and Russia could consider the conclusion of a bilateral security agreement to set out the specific rules of engagement and to allow Estonian, EU and NATO observers to participate in Russia’s exercises.
There are definitely other opportunities available to Estonia to safeguard its interests during the negotiations in a dignified manner. Whatever the end result, this time the decision-making process and the arguments must be more mature as is fit for a mature nation. Estonia is a state that is the most integrated with European and transatlantic institutions in the region and we must act like one. Our membership in the European Union extends us some credit and we must learn to use it wisely in connection with Russia. To paraphrase the Danish prince we all know from literature, to have or not to have pipelines – that is not the question. The question is whether or not we can play our cards right!

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