How Big Oil Pushed Europe’s Dependence on Russian Gas

March 23, 2022

Above, the CIA’s Reagan-era warning against excessive dependence on the then-Soviet Union for energy resources.

New York Times:

The language in the C.I.A. memo was unequivocal: The 3,500-mile gas pipeline from Siberia to Germany is a direct threat to the future of Western Europe, it said, creating “serious repercussions” from a dangerous reliance on Russian fuel.

The agency wasn’t briefing President Biden today. It was advising President Reagan more than four decades ago.

The memo was prescient. That Soviet-era pipeline, the subject of a bitter fight during the Reagan administration, marked the start of Europe’s heavy dependence on Russian natural gas to heat homes and fuel industry. However, those gas purchases now help fund Vladimir V. Putin’s war machine in Ukraine, despite worldwide condemnation of the attacks and global efforts to punish Russia financially.

In 1981, Reagan imposed sanctions to try to block the pipeline, a major Soviet initiative designed to carry huge amounts of fuel to America’s critical allies in Europe. But he swiftly faced stiff opposition — not just from the Kremlin and European nations eager for a cheap source of gas, but also from a powerful lobby close to home: oil and gas companies that stood to profit from access to Russia’s gargantuan gas reserves.

In a public-relations and lobbying blitz that played out across newspaper opinion pages, congressional committees and a direct appeal to the White House, industry executives and lobbyists fought the sanctions. “Reagan has absolutely no reason to forbid this business,” Wolfgang Oehme, chairman of an Exxon subsidiary with a stake in the pipeline, said at the time.

Those efforts, nearly a half-century ago, show how some of the world’s largest oil and gas companies played a critical role in opening up Russia’s reserves by opposing sanctions and advocating for business interests over national security, human rights or environmental concerns.

Today, Europe’s reliance on Russia’s gas has put European nations in a compromised position: They continue to purchase Russian energy, transferring enormous sums of money to Moscow, which fund a Russian invasion that they denounce.

Reagan’s effort to block the pipeline decades ago, which ultimately failed, also laid the foundations for a huge build-out of natural gas, which is now hindering Europe’s attempts to tackle climate change. Even as natural gas has helped to replace dirtier coal, the pipelines and other gas infrastructure that followed have effectively committed Europe to a reliance on gas that not only continues today, but remains difficult to unravel even in a moment of global unity against Russian aggression.

“The Soviet Union is a superpower that really emerged on the back of its oil and gas exports,” said Agnia Grigas, a senior fellow at the Atlantic Council and an expert on the security and energy issues of Russia and the former Soviet states. “Nothing has changed.”

In the face of opposition both at home and abroad, Reagan in 1982 reversed the sanctions, which had stopped American companies from supplying or participating in the project. The pipeline from Siberia to West Germany opened two years later.

The industry lobbying has continued to this day.

In 2014, when the Obama administration imposed sanctions against Russia following its military seizure of the Crimean peninsula from Ukraine, Exxon fought the measures, meeting with White House officials.

As Russia this year massed troops on the Ukrainian border, the American Petroleum Institute, the powerful industry group, lobbied against tougher sanctions, saying that any measures needed to be “as targeted as possible in order to limit potential harm to the competitiveness of U.S. companies.”

In the wake of Russia’s brutal invasion of Ukraine, Shell, BP and Exxon have said they will end their Russian operations.

Casey Norton, a spokesman for Exxon, said the company “does not advocate for or against sanctions” but had communicated with the U.S. government “to provide information about the potential impacts on energy markets and investments.” He said that Exxon was complying with all sanctions, had discontinued its flagship project in Russia and was withholding new investment there.

A little more nuance added here.

Felix Chang for Foreign Policy Research Institute:

But was this really so sudden for Germany? Not really.  Since the late 1960s, Germany (then West Germany) had begun to take incremental foreign policy steps in its relationship with Russia (then the Soviet Union) that led to its natural gas reliance on Russia. At the time, West Germany’s Social Democratic Party (SDP) had just come to power.  Chancellor Willy Brandt and his center-left adherents believed that the best path to European security lay in building bridges to, rather than strengthening bulwarks against, the Soviet Union.  Brandt hoped he could establish trust with the East, as his Christian Democratic Union predecessor, Chancellor Konrad Adenauer, had done with the West.

Brandt’s approach became known as Neue Ostpolitik (new eastern policy).  He argued that Germany could bring about Wandel durch Annäherung (change through rapprochement).  His efforts culminated in a number of accords between West Germany and the Soviet Union in 1970.  Among the first was one in which the two countries agreed to exchange West German wide-diameter steel pipe for future deliveries of Soviet oil and natural gas.  At the time it was the biggest trade deal ever concluded between the communist and non-communist blocs.  Later that year, the two countries signed an historic agreement to renounce the use of force.  Brandt assured his Western allies that Ostpolitik would neither weaken West Germany’s commitment to NATO nor make West Germany dependent on the Soviet Union.

However, Cold War realities eventually intruded on West Germany’s embrace of Ostpolitik. In 1981, the Soviet Union pressured Poland’s communist government to crack down on Solidarity, a Polish trade union which had been agitating for social change.  That prompted the United States to impose economic sanctions on the Soviet Union.  But Brandt’s SPD successor, Chancellor Helmut Schmidt, opposed such a confrontational approach to the Soviet Union.  Instead, Schmidt, in line with Ostpolitik, pushed ahead with West Germany’s pipeline deal with the Soviet Union to bring natural gas from Siberia to Europe, antagonizing the United States. Doing so Schmidt demonstrated how Ostpolitik could divide West Germany from one of its closest allies.

New York Times again:

The concerns raised during the Reagan administration four decades ago have been borne out. Before Russia’s attack on Ukraine last month, Germany relied on Russia for 55 percent of its gas, for example, complicating Europe’s response to Russian aggression in Ukraine.

For Ukraine, the consequences have been devastating. “The companies that have been working with the Russian regime were driven only by pure financial interest,” said Oleg Ustenko, a top adviser to the Ukrainian president, Volodymyr Zelensky. “They closed their eyes to the morality of it, and now we are paying the consequences.”

That battle four decades ago marked the start of a huge build-out of gas infrastructure in Europe. Today, an extensive network of pipelines stretches from Russia to Europe, supplying about 40 percent of the continent’s gas.

That network has given Moscow leverage over its European neighbors. In 2009, when Russia and Ukraine became embroiled in a diplomatic dispute, Russia shut off its gas supplies, leaving tens of thousands of homes without heat. More than a dozen people froze to death, mainly in Poland, before Russia reopened its pipelines.

An abundant flow of gas from Russia had consequences beyond security, slowing Europe’s efforts to tackle climate change by shifting toward renewables, experts say. The European Union has said it now aims to reduce its gas imports by two-thirds, and quickly ramp up its use of wind, solar and other forms of renewable energy.

“Obviously they could have done that before, but there was no incentive to,” said Margarita Balmaceda, professor of diplomacy and international relations at Seton Hall University and an associate at the Harvard Ukrainian Research Institute. Access to Russia’s gas, she said, had “definitely slowed the move toward renewables.”

Times article worth reading in its entirety.

3 Responses to “How Big Oil Pushed Europe’s Dependence on Russian Gas”

  1. neilrieck Says:

    The Berlin wall came down in 1989 and the USSR was dissolved in 1991. The USA is always banging on at spreading both capitalism and democracy so 1991 would have been the right time to offer a helping hand to nations that had tripped then fallen. But the USA did not do this (weird behavior for a self-described Christian nation). In fact, the USA ran around the world warning others not to do business with Russia so I can’t help thinking that the west’s inability to conclude our cold war mentality is one reason why we stand at the brink of another global conflict.

    • jimbills Says:

      Do you think it might also be that a certain former KGB officer surrounded by other former KGB officers, all with grievance for lost Soviet glory, would also have troubles concluding a cold war mentality? Or, have you considered that these same people have always viewed democracy and the West as existential threats to Mother Russia? Or, that Russia itself has always had an authoritarian government, and many in its population simply prefer that type of system?

      Or was Russia’s fate solely because the U.S. wasn’t friendly enough?

      The U.S. DID send billions in aid to Russia in the 90s, it supported the Russian government in several ways, and hundreds if not thousands of U.S. companies set up businesses there:

      As Putin tightened his grip on power in Russia over the successive decades, he increasingly set Russia up as a direct threat to democracy and the West – destroying Chechnya, subjugating Georgia, helping Assad stay in power by bombing the country to dust, annexing Crimea, supporting an eight year way to eastern Ukraine, and otherwise continuously threatening its neighbors. But, somehow, it’s the U.S. that caused everything.

  2. neilrieck Says:

    About this conflict. I don’t ever recommend podcasts but think that anyone curious about this current debacle should listen to just the first 10-minutes of this one


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