Abstract
The aim of this article is to explain why and how two formerly hostile states such as the USSR and West Germany concluded a gas deal in 1970 that lasted not only the 20 years that had been initially contracted, but until 2022. Based on new documents from Russian archives, this paper will analyse how natural gas for the Politburo turned from a minor natural resource to a worthy political tool and a ‘soft power’. While the Soviet gas minister had already advocated the global sale of gas in 1966 and the Politburo used it in 1966 itself as a means to bind Austria to its sphere of influence, Moscow changed its mind towards West Germany only in 1969 due to political developments. In order to bring Willy Brandt to power, put China in its place and teach Italy a lesson, Moscow changed its policy towards West Germany from risk avoidance to danger containment. Both sides independently developed the idea that binding the other's market to their own would prevent the partner from imposing another embargo (the West) or stopping deliveries (the USSR). The entanglement of markets was supposed to serve as a guarantee for the reliability of the respective contractor – the result of which we see today.
Patolichev had spared no effort nor made any concessions to the niceties of protocol. (…) In the Lüneburg salon of Hanover's celebrity Intercontinental hotel, Karl Schiller awaited him for lunch. And the ministers exchanged pleasantries as early as the first cocktail. (…) After the German–Soviet lovefest, the two ministers drove to the industrial fair in Schiller's official car, and the German had the opportunity to state that his visitor was a ‘cunning and business-minded man’ who reminded him of Khrushchev. (…) Through Patolichev, Moscow offered to supply West Germany with crude oil and natural gas on a long-term basis without any political reservations. 1
This was how Der Spiegel reported on the informal but decisive meeting of the two ministers at the Hanover Fair on 28 April 1969, which can be regarded as the official launch of West German–Soviet negotiations on the gas-for-pipes barter deal, which was signed in the two men's presence only nine months later. 2 While the German news magazine was translated and read extensively in Patolichev's Ministry of Foreign Trade, 3 Federal Minister for Economic Affairs Schiller reported to his chancellor that the talks were ‘conducted in a relaxed and loose atmosphere’. 4
Today, with Putin's invasion of Ukraine and the EU, namely Germany, looking for ways to end its dependence on Russian gas, the question of what the original reasons were to engage in this arrangement is even more important. It seems like what was once intended to guarantee the partner's reliability worked out too well: the entanglements of markets based on the construction of pipelines, both of which cannot be undone in a short time period. Therefore, the aim of this article is to explain why and how two states that had been formerly been so mutually hostile such as the USSR and West Germany concluded a gas deal in 1970 that lasted not only the 20 years of the contract, but until now. This paper will be argued that, in order to overcome the mutual mistrust and thus minimize the risk of sudden breakup that could be caused by, for example, an embargo by the West or a political change in the East, both sides developed concepts to bind the other's market to their own, which resulted in the situation we see today. However, a further point needs to be considered: with the containment of risks, the Politburo realized how pipeline construction could be used as a political tool and a positive incentive to reach not only economic closeness but also political rapprochement. Selling gas became a ‘soft power’ in foreign policy.
These developments were the result of a time of change and new impulses: in 1964, Leonid Brezhnev had replaced Nikita Khrushchev in the Soviet Union, who after the disaster of the Cuban missile crisis in 1962 soon sought new cooperation with the West. Concurrently, the break with China was cemented and led to increasing border skirmishes. 5 Meanwhile, Austria put out feelers to Brussels, and the countries of Southern and Central Eastern Europe also made efforts to open up to the West. In energy policy, Khrushchev's replacement meant turning away from the energy sources of hydroelectric power and coal, which were propagated as ‘revolutionary’; the gas industry was finally able to free itself from the tutelage of the oil industry. In West Germany, the entry of the Social Democrats into the federal government at the end of 1966 raised the first Soviet hopes of the FRG turning away from its hostile policy. The year 1966 also saw the lifting of the embargo on the tubes that NATO had imposed on the Soviet Union in 1962. The still-ongoing construction and industrialization process in West Germany created a growing demand for energy that was difficult to meet, especially in Bavaria, which was poor in natural resources. There were hence developments on both sides that facilitated a linkage of political with economic goals.
The discovery of major gas fields in the Sahara in Algeria, in the Netherlands near Groningen and in the Soviet Union in Siberia around 1960 had another decisively favourable effect on this junction of political aims and economic means. 6 These three major energy deposits in the South, West and East created a new energy map on which old state borders seemed to disappear. The main factor of the choice of gas to purchase became less to do with whether it was located in the East or the West; rather, the question of transport, quantities and price was considered. Natural gas stimulated the pipeline boom interconnecting and making the states dependent on one another in a completely new way: since the shipment of gas was substantially cheaper by pipelines than by train, ship or truck, the buyers were reliant on their neighbouring states having a connection to the pipeline system. 7 Hence, another precondition for East–West trade was the completion of the Bratstvo (Brotherhood) pipeline connecting Soviet Ukraine with Czechoslovakia, which eventually reached the Western border of the Eastern bloc in 1967. 8
Energy politics and energy diplomacy are well-developed fields and play an increasingly prominent role in contemporary history. 9 In an edited volume, Jeronim Perović dealt with nearly every aspect of ‘Cold War Energy’ and the countries involved. 10 Dunja Krempin and Thane Gustafson have recently investigated the rise of the USSR or Russia as an energy superpower and the transnational interaction with Western Europe. 11 Oscar Sanchez Sibony has also contended in his path-breaking book that the Soviet Union never pursued autarky, but that it was always seeking to trade with the capitalist West. 12 A more current idea is that natural gas served as a ‘bridge’ between East and West. 13 Accordingly, Per Högselius was able to show how eager the Soviet Union was to sell natural gas to the West and how respective contracts were signed with Italy (1967/1969), Austria (1968), West Germany (1970), France (1972) and other states. 14 While Högselius gives the credit for the West German–Soviet gas deal to Bavarian Minister for Economic Affairs, Otto Schedl, the chronicler of Ruhrgas, Jochen Bleidick, recently vehemently rejected this assessment and awarded this honour to the Ruhrgas chairman, Herbert Schelberger. 15
However, one of the first and valid inquiries into the interdependence of trade and politics, namely Willy Brandt's Ostpolitik (Eastern policy), was written by Angela Stent in 1981. 16 She came to the conclusion that the German Federal Government supported the first gas deal with the Soviet Union in 1969/1970 as a catalyst for political rapprochement. 17 While her very careful reasoning that political considerations, too, prevailed over economic needs for the Soviet side is occasionally questioned, 18 it convincingly argues that the gas negotiations and aspirations for détente entered into a symbiotic relationship – a stance that is also taken up in this paper. Gas deals or deliveries were even used to soften political tensions not only after the invasion of Czechoslovakia in 1968 but also after Afghanistan in 1979. 19
Nevertheless, while it is common to look at this history from a Western point of view, this article brings the Soviet side to the fore: from the late but rapid rise of the Soviet gas industry to the idea of not only selling it to West Europe, but also using it as a political tool. The first such case was when gas was offered to Austria in 1966 as consolation after the Soviet Union had denied its attempt to join the European Economic Community (EEC); in 1969, Moscow offered natural gas to West Germany in order to keep it away from China and to get Willy Brandt into power.
It is possible to focus on the Soviet side because the Politburo files in the Archive of Contemporary History (RGANI) in Moscow have recently become accessible, albeit being poorly indexed. Unfortunately, this does not apply to central decisions of the Council of Ministers in the Russian State Archive (GARF), which have not been released. Meanwhile, on the German side, the Ruhrgas files are no longer available. The successor company, Uniper, is keeping them under lock and key until further notice without disclosing the precise reasons.
From natural resource to political tool
Even after the discovery of enormous gas fields in Siberia, gas still played a minor role compared to the still-favoured gigantic hydroelectric power stations, which were the result of Soviet engineers’ achievements, the black coal produced by proud Stakhanovite workers, or even the semi-liquid oil, the strategic meaning of which was only discovered during the war. 20 Natural gas had neither a positive image nor political support. 21 Still, in 1963, the chemical lobby was able to temporarily convince Nikita Khrushchev that gas production for energy supply was harmful because it would destroy resources for future generations. 22 It was only in 1965 that the Soviet gas industry was able to establish its own ministry under Alekseĭ Kortunov. 23 Kortunov and his future partner, Trade Minister Nikolaĭ Patolichev, were old party soldiers who had worked their way up from poor backgrounds and gone through the hard school of Stalinism and the war. 24 After 1945, Kortunov had risen in the Oil Ministry, having finally pushed through his own Gas Ministry. 25 Thus he was experienced in forcing his own initiatives against the majority. He had already visited Canada in 1958 and the USA in 1962 to explore the gas industry in the two countries. 26 Patolichev had trodden the party career path and been Byelorussia's first chairman for six years before taking over the Ministry of Foreign Trade in 1958, which he led until 1985. 27 He was a convinced representative of the ‘New Western Policy’ and promoted the idea that foreign trade served peace and an intertwined economy prevented wars: ‘The expansion of the Soviet Union's trade relations was a factor that decisively led to the end of the “Cold War”’. 28 It was therefore unusual but not surprising when, one year after the establishment of his ministry and at a meeting with his deputies in 1966, Kortunov raised the issue that limiting gas supplies to one's own country was hampering economic development and that the USSR urgently needed to expand to the world market, especially to Europe. 29 In order to develop the newly discovered gas fields in Tyumen, Siberia, and connect them to Europe, 5,000 km of pipeline were needed, which the Soviet Union could not produce in either quantity or quality. 30 Kortunov commissioned it to his aide Stepan Derezhov, whom he had appointed to head the newly formed Foreign Trade Relations Department, to work it out. 31 The construction of 5,000 km of pipeline to exploit the Siberian gas became a political priority in the 1970s and was high on the agenda when Leonid Brezhnev travelled to the West to promote the USSR's ‘inexhaustible resources’ 32 : ‘Reach out, don't wait’, he claimed. 33
However, a lot of persuasions was needed at the beginning of the campaign. In long discussions and endless meetings Kortunov and Derezhov had to convince the Council of Ministers under Alekseĭ Kosygin that they had enough gas for export, but not enough of their own resources and technology to develop the natural gas industry quickly. It is not only remarkable that Kortunov and Derezhov demonstrated so much self-initiative. It is even more surprising that they tested Western interest in gas without acquiring any respective decision of the Politburo. In the summer of 1966, they sent a delegation to offer gas to both the Italian Energy Association, the Italian ENI, and the German gas company, Ruhrgas, with whom they met in Vienna. The surprise was as great in Italy as it was in Moscow: ‘Where is Tyumen and where is Rome?’ 34 Yet, both were not unknown partners to Moscow: Italy was the first Western country to buy Soviet oil in 1959; in August 1966, Prime Minister Kosygin and the Italian car company, FIAT, had signed a major contract of building a car factory on the embankment of the Volga. 35 West-German companies were well-known and the most favoured partners before the embargo of 1962. Hence, although we do not know if the gas offer was an official testing of the ground that had been approved by the Politburo under Brezhnev, if it had just been agreed with the prime minister, or if it had not even been communicated to both of them, Kortunov obviously tried to use the momentum of the changing situation in 1966.
In order to promote the international deal at home, Derezhov and he highlighted the benefit for many of the domestic regions through which the pipeline would pass, namely that it would bring them the ‘blue fuel’. 36 On 28 October 1966, the Politburo finally agreed in principle to build a USSR–Italy pipeline via the CSSR, Austria and France. 37 Apparently, the Soviet government eventually did not only accept the idea to gain technology and know-how in exchange for gas; it also began to see it as a political tool.
In mid-November 1966, Soviet President Nikolaĭ Podgorny flew to Vienna to deny neutral Austria its desired entry into the EEC and, instead, offered the country Soviet gas as a form of consolation. 38 Soviet Foreign Minister Andreĭ Gromyko had explained to Austrian Foreign Minister Lujo Tončić-Sorinj in New York that, in Moscow's eyes, a tie-up with Brussels would violate the Austrian State Treaty and the neutrality requirement. 39 A ‘cold shower for Austria’ was the press's verdict: the ‘illusion (…) was over’. 40 However, the media speculated that Moscow's fear was not so much of the EEC as of Austria falling entirely under the control of the ‘reactionary-aggressive’ West Germany 41 ; the warning of a rendezvous with Brussels contained in the refusal was allegedly directed less at Austria than at the Soviet satellite states, which were eagerly putting out their feelers to the West. 42 Either way, the Soviet Union made an example of Austria that was as clear as it was simple: Vienna wanted Europe and got connected to the cross-border natural gas pipeline – this was European economic integration Soviet style.
As the Austrian media speculated correctly, the USSR still saw West Germany as a ‘reactionary-aggressive’ state and thus not eligible for gas deliveries. As the Soviet ambassador to Warsaw, Boris Aristov, stated: Bonn was ‘the only place in Europe from which a peaceful and unifying development is disturbed or hindered. How could there be such unrealistic and illusion-driven politicians as the West Germans? One must slowly realize that there are now two German states that will have to live side by side and therefore with each other for some time to come’. 43
Accordingly, on 24 February 1967, the Soviet Council of Ministers decided to set up a delegation to negotiate gas supplies to Austria, Italy and France – and expressly not to West Germany. 44 Moreover, while the Soviet Council of Ministers decided in December 1966 to send 125 experts to the International Gas Congress that was to be held in Hamburg in June 1967 and tout via 11 lectures what Soviet power had achieved in 50 years in the gas industry, 45 Ambassador Semën T͡Sarapkin and trade representative Stanislav Volchkov did not succeed in convincing their government to represent the Soviet Union at the Hanover Fair in April 1967. 46 Although no explanation was given, 47 the reason for excluding West Germany was obvious from the questions that the Soviet Trade Mission in Cologne kept asking the West Germans in 1967: would it be possible in the future to do business with the FRG ‘without obstacles’? 48 The Soviet side was referring to the bad experience with the embargo imposed by NATO in 1962. 49 The Soviet trade representative in Cologne and the predecessor to Volchkov, Samsonov, told the Federal Ministry of Economics in April 1967 that the embargo remained ‘deep in the minds of the Russian people’ and therefore ‘certain political obstacles’ would first have to be removed. 50 Deputy Gas Minister Alekseĭ Sorokin did not tire of telling the West German press in June 1967 that the Soviet Union used to be Mannesmann's ‘best customers’ until the company stopped supplying steel pipes to the USSR due to the embargo. 51
The official policy towards West Germany did not hamper the efforts of Deputy Gas Minister Sorokin, who headed the delegation to the International Gas Union in West Germany and who was elected its new president in Hamburg, to take advantage of the trip and openly promote Soviet gas. 52 When he told the assembled press on 9 June 1967 that the USSR had natural gas reserves of 60,000 billion cubic metres, the interpreter had to ask in amazement whether he had heard the amount correctly and whether it was not 6,000. The natural gas experts present from Great Britain, the USA and France showed undisguised astonishment and surprise at this Soviet declaration that it was the world market leader in terms of gas reserves, leaving the USA far behind with an estimated 8,000 billion cubic metres. 53 Sorokin and his delegation used their trip as a real promotional tour of West Germany for Soviet gas, which took them to the Ruhr area as well as to Stuttgart and Munich. Although there are no accounts on personal encounters during these meetings, the newspaper reports and photos show that this round trip did not only serve to promote Soviet gas, but also facilitated Sorokin and his delegation in getting to know the future trade partner. 54
However, this boasting and promotion of Soviet gas were still not backed by Moscow. When the Soviet delegation came to Vienna in September 1967 to spend two weeks negotiating with Austrian representatives on the gas pipe deal at the neo-gothic Hernstein Castle in the Vienna Woods, 55 the official West German representatives were not welcome. 56 Only managers of the German steel industry were invited as subcontractors and thus could take advantage of the extraordinary setting that the Austrian government had arranged in the romantic castle in order to demonstrate their esteem, become acquainted with the partner and have time for informal talks in the lovely surroundings. 57
One year of permanent lobbying by Kortunov and Derezhov brought no results. On 16 November 1967, the Politburo again postponed the question of whether to negotiate directly with the FRG on gas for pipes. 58 Besides the negative experience with the pipe embargo of 1962, the Politburo also viewed West Germany as a different class of state: it differed from the socialist-dominated Italy, to which oil had already been sold in 1959, from France, which had left the NATO military alliance and with which the Soviet Union had a Joint Economic Commission since 1966, and from Austria, which Moscow still saw as a half satellite state anyway. 59 Finally, even under the grand coalition, West Germany was still considered ‘reactionary’ and ‘aggressive’, governed by far-right forces, 60 the closest ally of the USA, and thus taboo. 61
Pipeline construction meets political aims in Moscow
It must be emphasized that Moscow had every reason to distrust Bonn and not vice versa. So far, the FRG had refused to recognize the GDR, to acknowledge the Oder as Germany's eastern border, and to accept the special status of West Berlin.
62
Classifying the previous governments as ‘revanchist’ was thus more in line with real experience than a communist ideology.
63
Yet, there was another issue that preoccupied Moscow: the foreign policy unity of the Eastern bloc. With the establishment of diplomatic relations between West Germany and Romania in 1967,
64
Bonn had opened a breach in the unity of the socialist states, which the CSSR under Dubček threatened to undermine further in 1968. This is what the Austrian press referred to: once Austria would be allowed to associate with the EEC, Central-European states might follow. Only the suppression of the Prague Spring and the re-establishment of Moscow's hegemony ensured that the Politburo under Brezhnev felt secure enough to take on the discord-sowing Bonn.
65
On 13 February 1969, the Politburo decided to start official negotiations with West Germany on gas deliveries – two days after Ambassador T͡ Sarapkin had invited Willy Brandt to his house for lunch to ask him about the German interest in Soviet gas.
66
The basis was a nine-page report that Trade Minister Patolichev and Gas Minister Kortunov had submitted.
67
They explained that it had been of major concern first to meet the needs of the socialist brother states before requesting the approval for energy deliveries to the West. In other words, Moscow had feared that they might cause resentment or even new upheaval in East Berlin, Prague, Warsaw, Budapest and Sofia if they offered gas to Bonn first, but that had now been taken care of. Patolichev and Kortunov concluded: Hence negotiations with West German companies concerning the question of selling Soviet gas will palpably not evoke negative reactions on the part of the above-mentioned socialist states because their own request for Soviet natural gas could not be satisfied, which might have been the case before.
68
Having established this, Patolichev and Kortunov offered three arguments for contacting the West German side:
(1). They urgently needed German pipes of large diameter not only to construct the 5,000-km pipeline from Siberia to Europe, but also to connect the deposits that were constantly being discovered within the Soviet Union.
69
These pipes were manufactured by only three companies in Europe, two of which were located in Germany – Mannesmann and Thyssen – and one in Italy.
70
(2). The second consideration in favour of starting negotiations with West Germany in the spring of 1969 was that it would put pressure on ENI and accelerate the bargaining with the Italians, Who currently rely on the assumption that we are allegedly strongly interested in selling gas, namely to Italy, for political reasons and because in their opinion we cannot sell gas in Europe to any other capitalist country on the condition of providing us with pipes and technology for the Soviet gas industry by credit and pay off the loan with gas deliveries.
71
Although negotiations with ENI had been ongoing since March 1967, talks had been deadlocked on the price issue since April 1968.
72
Moscow wanted to show Italy that they were willing to sell gas to all Western European states, even the FRG. The latter was hence a purely commercial argument and definitely a capitalist practice of playing off one potential buyer against another. (3). Finally, Kortunov and Patolichev explained why the risk of doing business with such an unpredictable partner as the FRG was calculable: they relied on the intertwining of markets. The possible risk of ‘circumstances preventing further deliveries to West Germany’, obviously meaning another pipe embargo, could be neglected, because once the pipelines had been built, it would take major efforts and years on the part of the Germans to reshape their energy infrastructure to obtain gas from third suppliers.
73
Thus, the idea of linking the markets via pipeline was not to blackmail Bonn, but to create security: trust was good, but mutual dependence was better.
Nonetheless, while Kortunov and Patolichev addressed the economic issues and the interest of the gas ministry, the Politburo kept on discussing the political dimension and benefit of such a cross-bloc pipeline. In a paper submitted to the Politburo seven weeks after the decision of 23 February, in mid-April Foreign Minister Gromyko summarized not only the discussion of the inner circle but presented a shift in foreign policy towards the West in general and towards West Germany in specific. In order to ‘neutralize’ the FRG, in future not only ‘militarism, revanchism and neo-Nazism’ had to be fought,
74
but positive means such as economic cooperation were also to be used: ‘In this context, the project of building a trans-European gas pipeline to supply Soviet gas to Western Europe must be seriously examined and accordingly worked out in practice’.
75
In other words, the gas pipeline was to be used as ‘soft power’ in foreign relations and became an economic means to a political end. There was another decisive reason to constrain West Germany: After border skirmishes with China came to a head in early 1969 and resulted in several fatalities,
76
Gromyko expressed fears that China might ally itself with the ‘imperial powers’, including West Germany, which was China's largest arms supplier at the time.
77
Consequently, the Politburo was inclined to rely on the chance that Willy Brandt might become Chancellor in the elections of autumn 1969 and that this might result in a rapprochement towards the Soviet Union and a distancing from China.
78
In order to pursue this aim and implement the new ‘more differentiated approach’ in foreign policy, the Politburo decided not only to offer gas but also to develop a positive attitude towards parties, organizations, and social strata that could lead to ‘the victory in the election campaign of the forces that are more friendly to us, including the SPD’.
79
With the help of the KGB, which apparently had a source in the West German embassy in Moscow, the Politburo kept a watchful eye on how the SPD was willing to stick to its Ostpolitik despite the invasion of Czechoslovakia, and they thus knew that all statements by Soviet politicians were carefully analysed in Bonn.
80
Hence Trade Minister Patolichev and Foreign Minister Gromyko rallied efforts when they suggested in mid-April to the Politburo to accept the renewed invitation to the Hanover Fair only two weeks later: Kick-starting negotiations on the gas pipe barter deal would strengthen the position of the Social Democrat Party in the pre-election campaign of 1969.
81
Given the anticipated economic benefits of getting ENI to relent and send more tubes into the country as well as the political advantages of putting Brandt to power and China in its place, the Politburo switched its strategy and started to use pipeline construction as a ‘soft-power’ in order to reach ‘hard’ political aims.
Bavaria's need for cheap energy
At the economic level, the same idea prevailed at the time in Bavaria: to entangle the markets and make them dependent on each other in such a way that a break in economic relations would be equally painful for both sides. This is what the so-called ‘Miller Report’ advocated, a ‘Report to the President of the Special Committee on US Trade Relations with East European Countries and the Soviet Union’, written by 12 experts for US President Lyndon B. Johnson in April 1965. Over 20 pages, the special committee elaborated: Trade is a tactical tool to be used with other policy instruments for pursuing our national objectives. (…) Trade involves contact of people and exchange of ideas and customs as well as of goods and services. It requires the building of mutual trust, and good faith, and confidence.
82
The paper summarized: ‘Trade with the European Communist countries is politics in the broadest sense (…). We do not fear this. We welcome it’. 83
While the report played no role in the Johnson administration, 84 it greatly influenced and inspired Bavaria's Minister of Economic Affairs Otto Schedl, who came into office in 1957 with the declared conviction that economic development consisted first and foremost of infrastructure, meaning: energy policy. All Bavaria needed was cheap energy. 85 The energy question was particularly pressing, since the still semi-agrarian Bavaria was to be developed into an industrial state and its own gas resources were running out. 86 Yet, Bavaria was so far from the Ruhr area that transport made energy expensive: the price of 1 ton of coal was 20 DM higher in Munich than in the Ruhr region, heavy fuel oil 44 DM, and light fuel oil as much as 50 DM. 87 The same was true for the transport of gas from the Netherlands: the Dutch gas company, NAM, had concluded a contract in April 1966 to supply gas to the Southwest German region, but the price was so high at 0.12 Pfennig per 1,000 kcal that Bavaria rejected it. 88 The Miller Report was crucial to Schedl because he aimed to break the existing energy monopolies: of Ruhr coal on the one hand, and, on the other hand, of the ‘Seven Sisters’, the mighty Anglo-American oil companies, 89 which controlled NAM. 90 Schedl kept not only a copy of the English original, but also a German translation to which he referred in several talks. As a member of the Christian Social Union, he strictly denied being a supporter of Willy Brandt's Ostpolitik and insisted that he had followed a ‘new Eastern policy’ long before Brandt became Chancellor in the autumn of 1969, 91 which obviously underlines that he followed the US version documented in the Miller Report. There was certainly a difference in their conceptions: while the German grand coalition disputed whether economic concessions should be used as bait for political concessions or, conversely, the latter should be demanded as a condition for trade deals, 92 Johnson's conception envisaged using reciprocal trade deals to tie the socialist partner economically to the West and ensure its dependency. This was also Schedl's reasoning: self-sufficiency was an illusion. 93 The only way to avoid the danger of market dependency was to bind one's partner to oneself. The risk of breaking up relations, stopping deliveries from the Soviet side or imposing an embargo on pipes from the German side, had to be equally painful. Hence, the solution was the long-term intertwining of markets. 94 In the Miller Report, he found a guideline and reasoning as to why gas from the East was as good as from the West.
His first sensational coup in 1963 had been to turn Ingolstadt into a hub for oil refineries. 95 Thus, for Bavaria to import oil via the Netherlands or North Germany meant shipping it with tankers from Port Said or Gibraltar to Hamburg, Rotterdam or Wilhelmshaven and then all the way down south to Bavaria on trucks or trains. Schedl favoured and built a Port Said–Marseille–Karlsruhe pipeline that nearly halved the distance from 7,600 to 4,000 km. 96 With the help of Enrico Mattei, the head of ENI, he had won this first battle against the ‘Seven Sisters’. 97 Therefore, Schedl had already proven that he pursued an unideological rationality and was not intimidated by the Seven Sisters. The press and his opponents consequently called him the ‘dreamer on the Isar’, but also a ‘key figure in German energy politics’. 98
Consequently, in the summer of 1966, Schedl was excited to learn of the ongoing negotiations of the Algerian gas company Sonatrach with Austria and Italy. 99 However, the negotiations finally stopped in the autumn of 1966 because they could not agree on the price: while Schedl expected a maximum price of 0.6 Pfennig/1000 m3, Algeria demanded a minimum price of 0.8 Pfennig. 100 Furthermore, there was still no solution to the technological question of how to first liquefy and then again gasify the energy, not to mention the enormous costs of building the requisite Mediterranean harbours for liquid gas and a pipeline across the desert and the Alps, 101 a question that was not answered until 2022.
When Italy and Austria started talks with the Soviet Union in the autumn of 1966, Schedl hoped to join this group all the more because there was no sea to be crossed. 102 In November, he commissioned the German ambassador in Moscow to tell the Soviet Trade Ministry ‘unofficially’ that Bavaria was interested in buying up to 4 billion cubic metres of gas, which would be shipped via the pipeline that was planned to be built through Austria to Italy. 103 In early December 1966, the Austrian government explained to their Soviet partners that they were interested in buying more gas to redirect it via Austria to Bavaria 104 ; the Italian side did the same, proposing to purchase 10 billion cubic metres of gas – 5 for Bavaria. 105
Thus, along with Algerian gas, Soviet gas was deemed a solution as well as a welcomed third partner that would break the dominant position of the global oil and gas enterprises. Backed by the Miller report, Minister Schedl treated it, like Dutch or Algerian gas, as a means to an end; only the price and the transport route were decisive. 106 The result was competition for the Bavarian gas market between Algerian, Dutch and Soviet suppliers that became so fierce and open that, by late 1967, newspapers were writing about an ‘openly erupting gas war’ and a ‘tug-of-war for the southern German natural gas market’. 107 Thus, while the economic needs of Moscow in early 1969 corresponded to its political aims, the Miller report was for Munich an excuse not to pay attention to whether the gas was located on this or that side of the Iron Curtain.
Doubters in Bonn
In Bonn, the situation was assessed much more sceptically in terms of economics or the threat of a sudden stop of deliveries and politics or the risk of being blackmailed by the Soviet Union, at least initially. The federal government did not have a copy of the Miller Report or refer to it, and neither was it interested in weakening the position of the Ruhr mining companies. Willy Brandt only became Chancellor in late 1969, and, as the foreign minister, he had little influence on economic negotiations before then. In late June 1969, he complained to the minister of economic affairs that he had not been included in earlier plans to buy Soviet gas. 108 In the summer of 1967, Brandt had already sought an opinion on a possible branch of a future USSR–Italy gas pipeline to Bavaria. He had been making wait for an answer for several weeks by the Federal Ministry for Economic Affairs, which was very sceptical about the prospects of success. 109 After all, in order to implement his new Eastern policy, Brandt chose the same means as Schedl: seeking personal contact with the Soviet ambassador and getting an idea of the other's interests. This included visits to the private apartment or house of the Soviet ambassadors T͡Sarapkin in Bonn and Pëtr Abrasimov in East Berlin, with whom he even went to the sauna. 110
Minister of Economic Affairs Karl Schiller, although a Social Democrat like Brandt, had neither the latter's agenda of ‘change through trade’ nor Schedl's energy shortage and infrastructure plans; he also did not have their personal contacts. His ministry judged: ‘The Bavarian market is lost for coal anyhow’. 111 Yet, while Bonn evaluated Sahara gas as ‘admissible’ and an ‘eligible alternative to Dutch gas’, 112 Schiller had no idea that Schedl, preferring Soviet supplies, was no longer pursuing Algerian gas in November 1966. With regard to Algerian gas, the federal ministry had even reminded the Bavarian State Ministry that foreign trade was a federal matter. 113 Thus the difference in views was accompanied by a rivalry between the state and federal levels. It was not until January 1967 that Schiller learned about the idea of buying Soviet gas through the steel lobbyist Willy Schlieker, 114 whose circles were frequented by Schedl. 115 He advocated selling the Soviet Union the urgently needed steel pipes from Thyssen and Mannesmann and presented the idea of having them paid for with the gas that Schedl needed for Bavaria. 116 The federal ministry agreed with the Bavarian ministry that it would be highly desirable in the long term for the German market to be supplied by different streams of delivery, but: ‘An extensive dependence of the South German region on Soviet natural gas alone must raise serious concerns in regard to supply reliability’. 117 Furthermore, there was yet another concern: the volume of 5 billion cubic metres threatened not only German energy independence but also the position of the still-dominant German coal mining industry. 118 Nevertheless, Bonn was well aware that a growing dependence on the Esso-Shell group or NAM was not an option either. 119 The assessment of the situation was thus very similar. Still, Schiller neither shared the pragmatic approach of Schedl and the steel lobby nor the political vision of Brandt. At least he tried to learn more about Soviet aims, but his first invitation to Minister Patolichev to attend the Hanover Fair in 1968 was declined. 120 It was only in April 1969 that the Politburo finally accepted the invitation and allowed Patolichev to meet Schiller. 121
Hence, at the Hanover fair, it was the first meeting between a Soviet and a West German minister since Anastas Mikoyan's visit in 1958 and thus a minor sensation and the beginning of a new era. 122 However, even if Moscow and Bonn were eventually convinced about the advantages of mutual cooperation, both sides were very anxious not to ask for concrete negotiations so as to avoid ending up in the role of the supplicant. 123 No wonder, then, that the Soviet side reported that the Germans had expressed strong interest in buying Soviet gas for southern Germany at the meeting of the UN Gas Committee in Geneva at the end of January 1969, 124 while, after the meeting of the International Gas Union in Leningrad in March 1969, the Germans reported that Deputy Gas Minister Sorokin had ensnared them. 125 Three weeks after the historic meeting of their ministers at the Hanover Fair, State Secretary von Dohnanyi asked for ‘concrete Soviet proposals’, while Soviet Trade Representative Volchkov countered with a demand for ‘concrete requests’ from the German side. 126 To make sure that the FRG had serious intentions, the Soviet side expected an official return visit, which arrived on 23 May 1969, in the person of von Dohnanyi, who, however, disguised his visit as a trip to a trade fair in order not to appear as an applicant. 127 Again, both Patolichev and Dohnanyi pointed out to each other that the other party had to make the first move. 128 As the USSR had had a negotiating team since the talks with Italy and Austria, it was in fact now up to Bonn to put together an equivalent delegation. 129 After von Dohnanyi had consulted with both lobbyists of the steel industry and his experts, it was clear that Schedl, as the largest interested party to date, and Ruhrgas, as the only German gas company with sufficient international experience, capacity and reserves, should conduct the negotiations together. 130
Ruhrgas as an uncertain cantonist
Thus, Bonn, Munich and Moscow looked forward to the negotiations with an open mind and full of expectations and harboured only one serious concern: that Ruhrgas would torpedo the entire enterprise. This is interesting in light of the controversy as to who deserved the credit for the gas deal – the Bavarian minister Schedl 131 or Herbert Schelberger, CEO of Ruhrgas. 132 In fact, Schelberger initially did everything he could to snub both the Soviet side and Schedl: when he first met the head of the Soviet Trade Mission in Cologne, Volchkov, on 20 May 1969, he explained curtly and offishly that while he would be prepared to review concrete Soviet proposals, the purchase of Soviet gas would elicit several difficulties given Ruhrgas's own reserves and the territorial proximity to the Netherlands. Volchkov felt so offended that he said they would not force their gas on anyone and if Ruhrgas was not interested, the Mission would conduct negotiations with other companies, especially those in Bavaria. 133 The first personal encounter between Schedl and Schelberger on 4 June 1969 went similarly disastrously: as a result, both decided to negotiate separately with the USSR and to boycott each other. 134 Schedl answered this declaration of war by inviting all relevant partners for the first round of negotiations from 20 June 1969 on in Vienna – except Ruhrgas. 135 However, Schedl made a mistake when telling his Soviet negotiating partners that he was available only from 5:00 p.m. onwards. 136 Schelberger thus flew to Vienna and made sure that he met the Soviet delegation in the early afternoon. 137 This time he changed his strategy and instead of rebuking the Soviet offer, he tried to charm his partners by boasting about the potential of his company, which was contrasted with Bayern Ferngas, a local player and Ruhrgas's client. 138 The head of the Soviet delegation, Nikolaĭ Osipov, who had, of course, collected his own information on both Ruhrgas and Bayern Ferngas, 139 asked if they could sell natural gas to both German companies, which Schelberger categorically rejected: if the responsible Soviet organization Soyuznefteėksport signed a contract with Bayern Ferngas, Ruhrgas would withdraw immediately. 140 Osipov was clearly impressed by this rude declaration. Although they launched a final confidential trial to conclude the deal directly with Bayern Ferngas in late October 1969, when the negotiations seemed to be stuck, the Soviet side generally accepted that they would have to come to terms with Ruhrgas. 141 So did Schedl. He had to give in to the bigger player, which even openly tried to blackmail him in the late July of 1969 by proposing to prolong its offer to sell gas to Bavaria, subject to the negotiated conditions, until the end of the year if Bayerngas agreed to purchase Soviet natural gas only via Ruhrgas or one of their subsidiaries. 142 While in Vienna, Schelberger und Schedl continued to negotiate with their Soviet partners, with the meetings led by Schedl labelled as ‘political’ and those by Schelberger as ‘expert talks’ in the long course of six rounds of negotiations held alternately in Moscow and Germany. The final breakthrough came on 28 November 1969 with Schelberger succeeded in marginalizing Schedl; in the end, it was he who signed and had to answer for the contract. 143
Nevertheless, the Federal Ministry of Economics still did not trust Schelberger: the energy experts feared that he would try to scare off the USSR with delaying tactics or by buying too small a quantity. Thus, in the summer of 1969, the ministry was feverishly working on a plan B for how the federal government could help Bavaria, should Ruhrgas block the deal. 144 Klaus von Dohnanyi repeatedly urged Schelberger to play fair and guarantee that Soviet gas in Bavaria would not be more expensive than that from NAM. 145 The representatives of the steel companies Mannesmann and Thyssen were also worried about the role played by Schelberger 146 – and relieved when the ministry sent a ‘watchdog’ to Moscow for the third round of negotiations to check on him. 147
Yet, there were more headwinds: even before the negotiations began, representatives of the German gas suppliers paid a visit to the Federal Ministry and openly declared that the negotiations were a mistake. After the first two rounds, representatives of Ruhrgas and the German branches of Esso and Shell paid a visit to von Dohnanyj to declare that the German market had no capacity for Soviet gas – the earliest date that it could receive Soviet gas was in 1985. 148 Finally, the US State Department sent a representative of the US embassy in Germany to the Federal Ministry several times just to tell them they were watching but would probably not intervene. 149
Price beats politics
As with all gas negotiations, the price was the most contentious issue: Moscow's talks with Paris and Rome initially failed because of it. Only Vienna had signed the deal so far and soon had to defend itself against fierce accusations that it had accepted too high a price. 150 Although these were not ordinary negotiations, it was nevertheless commercial bargaining under market conditions. 151 Even if these dealings had a political dimension, for Moscow more than for Bonn, the Soviet negotiators quickly realized that the fact that Bonn, with Moscow's help, would reduce dependence on Dutch deliveries would not make it accept higher prices. 152 Hence, on the one hand, it was up to them to complain to the German ambassador or representatives of the German federal government that Ruhrgas was controlled by international monopolists and only pretended to be interested in concluding a deal. 153 On the other hand, Osipov was well aware of the fact that they had to offer a price that was attractive to their partners and that could compete with Dutch, Libyan, Algerian and British gas. 154 In fact, the question was less about whether the price was the all-deciding issue than what price to apply. Osipov argued that Dutch gas transported to Bavaria cost 0.72 Pfennig/1,000 kcal and that they would offer the price at which they sold gas to Austria (0.613 Pfennig) plus expenses for the transport to Bavaria, resulting in 0.663 Pfennig. Schelberger, however, requested the price of 0.5 Pfennig and referred to the fact that prices were falling. Following their contract with NAM, they had the right to revise the price for Dutch gas twice, not to mention gas from the North Sea, which stood at 0.423 Pfennig. 155 Further, both sides disagreed on how to evaluate the fact that Soviet natural gas had a higher caloric power than Dutch gas. While Osipov argued that this would justify a higher price, Schelberger claimed the opposite: to make the gas compatible with the West German pipeline network, they would have to process it, which would result in additional expenses. 156 In the end, Osipov had to accept that the price on the West German market could not be a summation of the price for Austria plus the expenses for shipment, but had to be competitive with all three energy sources that were struggling for their share of the South German market: Dutch gas, Algerian gas and even heavy fuel oil from Ingolstadt, which hitherto was the main energy source in Bavaria. 157 The final price of 0.5198 Pfennig/1,000 kcal was counterweighed by the contract term of 20 years and a volume of 3 billion cubic metres per year with the option to raise it by another 2 billion cubic metres per year. 158
Conclusion: ‘The spirit of realism and mutual trust’
When the three contracts on gas deliveries, pipe purchase and bank loans were signed in the luxury Kaiserhof hotel in Essen on 1 February 1970, Patolichev announced that the successful negotiations were a good example of how to solve not only more economic problems, but also all political questions in Europe: ‘We are convinced that the spirit of realism and mutual trust is stronger than all obstacles and that these developments will lead to all-European cooperation’. 159 Schiller, too, now a minister under Willy Brandt, underlined both the economic and the political dimension of this endeavour: ‘We submit a contribution to peace’ and ‘Credit means trust’, in the sense that the loans contract was extraordinary proof of the existing mutual trust. However, he also rejoiced that Soviet natural gas had entered the German market and hence had to deal with the competition of business rivals. 160 In this way, both expressed the symbiotic dependence in which they saw the economy and politics: the reliability established in the fulfilment of the treaties was the pledge for further political cooperation.
The idea of also binding the West German market to Soviet supplies in the long term – for 20 years, as the contract stated – and even making it dependent on Soviet natural gas was explicitly declared by the Politburo on 1 December 1969, 40 days after Brandt had been elected Chancellor by the Bundestag and two days after the general terms of the gas pipes deal had been settled. Yet, the 33-page resolution ‘On the political line and some practical steps of the Soviet Union in regard to the formation of the German government under W. Brandt’ was not the strategy of blackmailing and harming West Germany that the USSR was always suspected of doing; rather, it was about ensuring that the Germans remained a reliable partner: As a result, West German monopoly circles, which gain benefits from this gas contract (the mighty corporations Ruhrgas, Thyssen, Mannesmann and others) will apparently put pressure on the Bonn government in order to avoid any steps which could result in the deterioration of relations with the Soviet Union.
161
The plan worked: in 1982, when the USA imposed a new embargo on pipes, neither governments nor companies in Europe followed. 162 Instead, the Soviet Union was able to complete the 5,000 km pipeline in cooperation with a European conglomerate in 1983 to connect the Siberian gas fields with Rome.
While hitherto reference has always been made to Brandt's Ostpolitik or Brezhnev's Western Policy, this article has shown how long it took the gas and trade ministers in the Soviet Union to convince the Politburo of the advantages of such a deal with the former enemy. On the other side of the Iron Curtain, the Miller Report and Schedl's use of it preceded or prepared Ostpolitik while Brandt was not Chancellor yet and had to struggle to influence the development. The idea of using gas delivery as a political tool was first attempted in 1966 when the Soviet Union offered it to Austria as a means of consolation for the denied association with the EEC. Pipeline construction was its own form of European economic integration – with the centre in Moscow instead of Brussels. The pipeline was thus posed as a type of ‘soft power’ that could be used for ‘hard’ political aims. The paper of 13 February 1969 shows very well how the Politburo finally changed its policy towards West Germany as well: in view of the increasing threat of China and a possible chancellorship of Willy Brandt, cooperation with the FRG was seen as a lesser evil – with the Social Democrats at power it might even be productive – and offered the Politburo the chance to draw potential allies of China to their own side. The decision reflects not just a readjustment of strategy, but a fundamental change in political means and tools: away from a one-sided concept of sanctions, threats and defence, and towards a sophisticated set of instruments consisting of economic incentives and positive influence on the society.
Moreover, the paper illustrates how much the Soviet Union depended on its ‘brother states’, their needs and mood. In earlier research, reference has been made only to the suppression of the Prague Spring as a decisive factor in strengthening the confidence of the Soviet Union in its foreign policy. This article shows that, in fact, satisfying the economic demands of the satellite states, especially concerning energy, played at least as important a role in determining Moscow's room for manoeuvre.
The obstacles, concerns and readjustment of energy policy were thus much greater in Moscow than in Bonn, and this was not only because of the shock at Bonn's breach of the treaty in 1962 that remained deeply seated. The policy of refusing to recognize the post-war reality until 1970 did not make Bonn appear to be a satisfactory partner. This only changed with the prospect that Willy Brandt could become Chancellor and put the FRG on a new footing. It should not be underestimated how much the Politburo under Brezhnev was interested in helping Brandt by any means, especially with the gas deal, in order to realize its own foreign policy goals.
Finally, it is important to understand that Moscow received support not only from the steel lobby, which was equally appalled by the 1962 embargo, but also from Munich. Schedl's efforts to break the energy monopoly of the Ruhr and the ‘Seven Sisters’ were decisive in initiating the West German–Soviet gas deal. While local self-empowerment was not welcomed in Bonn, Schedl acted in a global context as he was spurred on by the Miller Report and the prospect of being able to freely choose his energy supplier on the new, borderless gas market between the Sahara, the North Sea and Siberia. Precisely because he represented neither the FRG nor a company, he showed great skill in putting out feelers through unofficial channels and middlemen, establishing contacts and sounding out the opportunities for Bavaria. Even though Schedl, ultimately under pressure from Bonn, had to hand over the lucrative deal to Ruhrgas, he was clearly the one who initiated the deal and made it possible by refusing to accept monopolists as energy suppliers in Bavaria.
Irrespective of the political aims and energy needs, the restrained risk by entangling markets did not change the fact that, in the end, the price was pivotal. In this regard, the last word was spoken by Ruhrgas, and the Soviet delegation had to accept market rules and to adapt to price competition. Although Osipov complained to von Dohnanyi that Schelberger was playing tactical games, he had to accept that the price did not follow political goodwill, but that it was the result of the hard battle of supply and demand.
As for how good the plan has worked out to entangle markets, make them interdependent and a break-up equally painful to both sides, we can make at least one observation in today's political and economic milieu: A ban on Russian gas from EU markets damages Russian financial flow as much as it threatens European energy supply security.
Footnotes
Declaration of conflicting interests
The author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author received no financial support for the research, authorship, and/or publication of this article.
