Pipe world

Moscow, February 3 – “News.Economy” February 1, 2020, Russia and Germany celebrated the 50th anniversary of the signing of the historic agreement, “gas in exchange for pipes”, through which between then geopolitical rivals has a new sustainable economic relations, which became the basis for the development of a civilized dialogue and the welfare of both Nations. This is the story of overcoming differences and mistrust in the name of long-term economic interests, which are still relevant and instructive in our days.

Borislav Ivanov-Blankenburg, Chairman of the Board, OOO “Deutsche Bank”

At the heart of this “deal of the century” was a simple idea – supply of large diameter pipes from Germany for the construction of the Soviet pipeline network in exchange for gas supplies to Western Europe. The first negotiations began in the 1950-ies, however, the signing of the first contract for the supply of gas took place only on 1 February 1970 and demanded decisiveness and ingenuity.

Predystoriyu the early 1950-ies in Germany was established the Eastern Committee of German economy, which included the heads of the leading industrial corporations and financial institutions in the country. Their goal was to expand economic relations with the Soviet Union and Eastern Europe. During these years, the German economy recovered quickly and were in desperate need of energy and new markets for their products, in view of what the Soviet Union represented a great interest for German businessmen. However, geopolitical contradictions seriously complicated the talks and in the society has the feeling that such projects are impossible. By the end of 60-ies on the background of the political changes in Germany and the beginning of the era of the “new Eastern policy” in the stalled negotiations, there has been a breakthrough. The first successful attempts of a dialogue on the collaboration of Germany and the USSR in the oil and gas sector was held in the framework of the Hanover industrial fair in late April 1969. These meetings are StAli signal the beginning of further substantive talks on a mutually beneficial economic cooperation, which took place over nine months in Vienna, Moscow, Essen and Cologne.

February 1, 1970 the signing of the first gas contract in Essen. In the center of the speaker of the management Board Deutsche Bank AG – F. Wilhelm Christians. Photo courtesy Deutsche Bank

Delcavoli overcome political differences and agreeing on commercial terms, the question arose about the structuring and financing of a project of this scale in the absence of such experience, and financial isolation of the USSR. And a leading role in finding the optimal solution for the funding and support of the transaction belongs to a consortium of German banks under the leadership of Deutsche Bank, which provided a credit line of 1.2 billion marks to the Soviet Union with a maturity until September 30, 1982.

In February 1, 1970, was the signing of the first agreement to supply natural gas from the USSR to West Germany between the foreign trade Association “Soyuznefteexport” and “Ruhrgas AG”. The signing was attended by Minister of foreign trade Nikolai Patolichev and Minister of economy of Germany Karl Schiller. USSR pledged to supply natural gas in Germany for 20 years in an amount not less than 52.5 billion cubic meters since 1973. At the same time the West German company “Mannesmann” and “Siemens” signed a separate agreement to supply 1.2 million tons of large diameter pipes for construction of gas pipelines in the USSR.

Economic wygodny Soviet gas came to Germany in 1973, just before the world oil crisis, during which energy prices rose significantly. However, previously signed a deal with the Soviet Union guaranteed Germany an uninterrupted supply of gas at a predetermined price. In addition, the project with the Soviet Union provided the largest orders of the West German enterprise “Mannesmann” and “Thyssen”.

As for the Soviet Union, he gained access not only to the Western market, but also to Western technology, and in the course of contract implementation was created Europe’s largest network of pipelines. This project contributed to the development of the largest gas fields in the world and the creation of jobs, and subsequently provided for stable foreign inflows to the budget.

“the deal of the century” was actually the beginning of a system of long-term agreements signed in the 70s-80s. They provided supplies from the USSR to West Germany 11-12 billion cubic meters of gas annually until 2000, including 700 million cubic meters of gas to West Berlin. Just since 1973, the Soviet Union and later Russia supplied Germany with more than 1 trillion cubic meters of gas, becoming the largest supplier.

But most importantly, the deal started the process of normalization of relations between the USSR and Western Europe. Revived trade relations started to develop new forms of collaboration, has opened representative office of Deutsche Bank in Moscow in early 1973 to support the increased business activity of German companies. The trade turnover of the USSR with Germany was reached in 1975 to 2.8 billion rubles, exceeding the level of 1965, more than 10 times. Firms from Germany were actively involved in the construction of infrastructure projects, for example, Deutsche Bank arranged financing for the construction of the international airport Sheremetyevo.

Fifty years sportbladet determination and commitment to long-term economic interests of our predecessors, Germany and Russia still remain important trading partners for each other. A new large-scale projects of the Russian gas pipeline from China to the Baltic and Black seas, we see the legacy of the initiative “gas in exchange for pipes”, and also as 50 years ago a deep understanding of the mutual benefits and the ability to compromise helps the implementation of such large-scale programs.

Minister of economy and energy in Germany Peter Altmaier, speaking at the annual reception of the Committee on Eastern European economy, said: “Over the 50 years since the conclusion of this transaction, we experienced big challenges in international relations, in relations between East and West. We disagreed with many things that were doing at the time, the Soviet Union∎ but it remains true that, regardless of all these political circumstances, gas supply, compliance with the delivery obligation was never threatened. And it shows that the developed economic relations it is possible to build, but need to fight for it and need it to invest.”

As 50 years ago, these days, international business has consistently advocated cooperation and expansion of economic cooperation, proving long-term benefits for all stakeholders. As history shows, that international economic projects remain our main instrument in building a sustainable civilized relations between the countries. Text: News.Economy