Exploiting European Dependence
The NIE, regarded as the definitive product of the U.S. intelligence community, reached several conclusions, among them that the Soviet Union "calculates that the increased future dependence of the West Europeans on Soviet gas deliveries will make them more vulnerable to Soviet coercion and will become a permanent factor in their decision making on East-West issues."
In addition, according to the NIE, the Soviets "have used the pipeline issue to create and exploit divisions between Western Europe and the United States. In the past, the Soviets have used West European interest in expanding East-West commerce to undercut U.S. sanctions, and they believe successful pipeline deals will reduce European willingness to support future U.S. economic actions against the USSR."
The Urengoi gas field, located in northwest Siberia's Yamalo-Nenets Autonomous Okrug, was one of the largest Soviet gas fields. The main customers for Urengoi gas were West Germany, France, and Italy.
The initial volume of the pipeline was to be 40 billion cubic meters per year, which would mean that Soviet gas could account for 30 percent of German and French gas imports, and 40 percent of Italy's. Such figures were approaching a dependency level too great for the White House to accept.
Washington apparently dealt with these concerns in a direct manner initially. In January 1982, U.S. President Ronald Reagan purportedly approved a CIA plan to sabotage a second, unidentified gas pipeline in Siberia by turning the Soviet Union's desire for Western technology against it. The operation was first disclosed in the memoirs of Thomas C. Reed, a former Air Force secretary who was serving in the National Security Council at the time. In "At the Abyss: An Insider's History of the Cold War," Reed wrote:
"In order to disrupt the Soviet gas supply, its hard-currency earnings from the West, and the internal Russian economy, the pipeline software that was to run the pumps, turbines, and valves was programmed to go haywire, after a decent interval, to reset pump speeds and valve settings to produce pressures far beyond those acceptable to pipeline joints and welds.
"The result was the most monumental non-nuclear explosion and fire ever seen from space," he recalled, adding that U.S. satellites picked up the explosion. Reed said in an interview that the blast occurred in the summer of 1982.
U.S. Embargo, Sanctions
The sabotage operation, however, did not halt the construction of the Urengoi pipeline. The CIA was forced to revise its tactics.
Responding to the Soviet leadership's support for the 1981 crackdown on Poland's Solidarity movement, Reagan announced a program of sanctions on companies selling gas-drilling equipment and turbines for gas-compressor stations to the Soviet Union while urging European states not to buy Soviet gas.
Officially it was declared that this was in retaliation for Soviet support for martial law in Poland. But it is also plausible that the strategy was meant to ease U.S. concerns about the construction of the Urengoi-Uzhhorod gas pipeline.
The embargo, however, was easier to declare than to implement.
Norwegian scholar Ole Gunnar Austvik wrote in an article titled "The U.S. Embargo Of Soviet Gas In 1982" that a delegation under the auspices of the U.S. State Department sought to induce the Western Europeans not to buy Soviet gas and to choose alternative sources of energy.
"The arguments in favor of such diversion were close to our notion of economic warfare, even though the whole range of arguments was actually used. An economically strong Soviet Union is more dangerous than a weak one," Austvik wrote. "The U.S. compensation package contained two main components; American coal and Norwegian gas were presented as alternatives to Soviet gas."
Neither alternative, however, existed. The United States did not produce enough coal to meet Europe's needs and even if it did, the logistics of transporting it there were overwhelming. Furthermore, at the time Norway's gas production was not sufficient to replace Soviet gas. By November 1982, after the United States increased its grain sales to the USSR, the gas sanctions were terminated.
Back To The Future
Originally, the Urengoi pipeline was projected to go through East Germany, but the West German government protested and it was rerouted through Soviet Ukraine. The West Germans were concerned that in the event of a crisis, the East Germans could turn off the valves and stop supplies. Soviet Ukraine was seen as the more reliable transit route.
The 1982 NIE states that the West Europeans' prime energy goal at the time was to "reduce their dependence on OPEC," at the time a significant Western concern arising from the Organization of Petroleum Exporting Countries (OPEC) oil boycott of 1973. The oil crisis that ensued from that boycott may have fueled U.S. concerns regarding Soviet gas, lest the Soviet Union someday copy OPEC's tactic.
In November 1983, the CIA issued another NIE, titled "Soviet Energy Prospects Into The 1990s," which, in many ways, foresaw the current predicament.
"If Moscow lands contracts to supply even half of the West European gas-demand gap now foreseen for the 1990s, an additional pipeline...would be required...and dependence on Soviet gas could approach 50 percent of gas consumption for major West European countries, far in excess of the 30 percent share that we and some West European governments regard as a critical threshold for political risk" the NIE stated.
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- Ukraine consumes 70 billion cubic meters (bcm) of gas per year. It produces 20 bcm of its own gas, has a signed contract to import 40 bcm from Turkmenistan, and in 2005 was getting 29 bcm from Russia as payment for transit of Russian gas.
- Ukraine sells some 7 bcm of gas a year to the West and places some in underground storage facilities. These facilities can hold 34.5 bcm.
- Ukraine is the sixth-largest consumer of gas in the world and uses more gas than Poland, the Czech Republic, Hungary, and Slovakia combined.
- Russia has proven gas reserves of 47 trillion cubic meters (tcm) -- the largest in the world ahead of Iran and Qatar.
- Russia sells approximately 160 bcm to Europe each year. By 2015, Europe is expected to import 300 bcm, or 40 percent of its projected needs from Russia.
- Russia's Gazprom is the world's largest gas company. It is the only company allowed by Russian law to export gas outside the borders of the CIS. It also owns the gas-transportation system and most of the gas fields in Russia.
- The Russian state is Gazprom's majority shareholder , with a 51 percent share. The company's ownership rights changed as of the beginning of 2006, with Gazprom stock being sold on the open market. The Russian state, however, will continue to hold the majority stake.