German business eyes huge Soviet gas ideal in pipeline
With the implied Soviet threat to Poland heating up -- and with Moscow and Washington embarked on a slanging match -- the climate is inauspicious. But West German businessmen are still pressing ahead with negotiations on what would be the biggest East-West deal ever: the $10-15 billion Soviet-gas-for-German- pipeline exchange that both sides hope to wrap up by this summer.
Unconfirmed West German reports say the two sides reached preliminary agreement at the end of January on 10-year credits at the low interest rate of 7 .75 percent. Some West German bankers are suggesting that because of complex pricing and other conditions this formal rate would amount to a real interest of 9.75 percent. But the whole state of play is extremely murky.
What is clear is that for West Germany both the potential economic gains and the political risks are enormous.
The gains would include a significant move away from dependence on uncertain Mideast oil and a major contract for the recession-hit steel industry. From 1985 on into the 21st century West Germany would get an additional 12 billion cubic meters of Soviet gas annually. France would get 10 billion, with the remainder of the total 40-45 billion cubic meters going to other Western European buyers. At present, Western Europe imports 24 billion cubic meters of natural gas from the Soviet Union.
The political risks in the deal could include a Soviet invasion of Poland and a retaliatory Western embargo on technology sales to the Soviet Union. The risks could include as well as inhibiting dependence on Soviet energy for Western Europe.
West Germany, the key country in the equation, currently derives 15 percent of its oil and natural gas (17 percent gas alone) from the Soviet Union. French figures are comparable. Under the agreement now being negotiated, by 1990 the share of Soviet supplies in West Germany's total gas consumption would jump to 30 percent -- or 5 to 6 percent of primary energy.The share of Soviet supplies in continental Eastern European gas consumption would jump to 10-12 percent.
Despite repeated Soviet failures to deliver contracted gas during cold spells -- this winter's deliveries to West Germany will drop a third below promised amounts -- West German businessmen view Soviet gas as much more reliable than Mideast oil. And the Bonn government views the projected ceiling of gas dependence on the Soviet Union as tolerable strategically.
Some conservative American "think tanks" are suspicious of the deal, however, and the West Germans are waiting to see how President Reagan will come down on the issue. Basically, conservative strategists (including some conservative politicians in West Germany) fear the impact of any Soviet bullying tactics on Western European policies when the Kremlin could turn off the spigot on so much Western European energy.
The dilemma that has divided the US strategic community -- whether it is more "stabilizing" in the world to help or stay aloof from future development of the Soviet Union's vast energy resources -- hardly exists among West German businessmen. The hope that Moscow might divert domestic military into industrial technology if it could not rely on the West is not given much credence. The assumption is rather that the more energy sources there are in an energy- short world, the better for everyone.
From this perspective, Western help in exploiting Soviet natural gas reserves -- estimated as the largest in the world -- is seen as a desirable move. And Soviet trade with the West -- gas is expected to replace oil as the top Soviet hard-currency earner in this decade -- is still seen as more likely to promote Soviet moderation than ostracism.
The West German steel, compressor, and refrigeration companies are also eager to get the expected 10 billion deutsche marks ($5 billion) worth of orders from this $3,600- mile pipeline, the longest in the world. Mannesmann has developed a new large pipe capable of withstanding high pressures, and it looks forward to displaying this pipe in a showcase Siberian project -- as well as to assuring those 2,500 extra workplaces that the Soviet order would bring.
No subsidized West German government credits would be involved in the deal (though French government subsidies might be). On the West German side, the only government involvement would be in credit guarantees.