Pipedreams and Nightmares

By Risto E. J. Penttilä
Director of the Finnish Business and Policy Forum EVA

This article was published on NORDICUM 1/2010

Gerhard Schröder and Vladimir Putin must be pleased. The construction of the Nord Stream, a gas pipeline the two leaders concocted in the 1990s, is about to commence. Hundreds of kilometres of gas pipes are waiting to be laid on the bottom of the North Sea. The governments of Russia, Germany, Poland, Finland and Sweden have given their consent. The final permit, an environmental license from local Finnish officials, was issued in mid- February.

The Nord Stream project got off to a very bad start. The Germans and the Russians concluded the deal without consulting their neighbours. Commentators in the Baltic States and Poland compared it to the infamous Molotov-Ribbentrop Pact, a secret agreement on the eve of the Second World War to divide the Baltic Sea region into Soviet and German spheres of influence. Environmentalists predicted a catastrophe. Swedish defence analysts saw the project as a means to achieve and ensure Russian naval dominance in the Baltic Sea. All in all, it was not pretty.

But good things may come out of bad beginnings.
Since 2006 the Nord Stream project has become the most comprehensive cross-border environmental dialogue in the Baltic Sea area. The dialogue has been conducted in nine languages plus English. It has survived the Bronze Soldier dispute between Estonia and Russia. It has not been derailed by the Polish-Russian “ham crisis” (when Russians decided to block the imports of Polish meat on health grounds). Nor has the dialogue been squashed by the war in Georgia in August 2008. Keeping such a dialogue going against all odds is an achievement in itself.

Dialogue is dialogue; what about the results? Who will benefit? Who will pay? The irony is that the pipeline may end up benefitting the Baltic States who criticised the pipeline the most ferociously.

The Baltic States are isolated energy islands. They are dependent on Russian imports while their indigenous sources of energy are seen as environmentally unsound. Estonia relies on oil shale that produces plenty of pollution. Latvia imports electricity from the neighbouring Baltic States and fuels from Russia. Lithuania had to close down the Ignalina nuclear power plant at the behest of the European Union.

The only solution for the Baltic States is to be connected to the European energy market. This is exactly what the pipeline may achieve. By increasing the amount of gas entering the European market it increases the likelihood that Baltic States will be connected to the European energy market in the future.

The European Commission will never say this but the Baltic Energy Market Interconnection Plan (BEMIP) would not have materialised without the pipeline. The pipeline increased political pressure on Germany as well as the Commission to take Baltic energy concerns seriously. The result was the action plan launched in 2008. The aim of the action plan is the full integration of the three Baltic States into the European energy market through the strengthening of interconnections with their EU neighbouring countries.

The Russians are also eager to show that they care. As soon as the government of Finland gave its permission to build the pipeline, Vladimir Putin agreed to participate in the Baltic Sea Action Summit in Helsinki. Not surprisingly, Nord Stream is among the summit attendees who have publicly committed to the preservation of the Baltic Sea.

The Nord Stream pipeline will not solve the environmental problems of the Baltic Sea region. Nor will it usher in a new era of harmonious political relations. But it is encouraging to note that a project that was derided as a pipedream by some and as a nightmare by others, may actually bring some benefits as well.