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in exchange it gave Wintershall a 35% stake in a new field called “Yuzhno- Russkoye,” in the northern part of
West Siberia. This gasfield too was
rich in liquids, and required advanced technology. At the same time, as part of the new deal, BASF and Gazprom began discussing a new “Northern European” gas pipeline, to bring the gas from Yuzhno-Russkoye to Germany.
The second round was blessed personally by Putin, who attended the official signing of the memorandum of understanding in a ceremony at the annual Hannover Trade Fair, together with then-PM Gerhardt Schroeder. Putin praised the BASF-Gazprom partnership as a historic development.
“This is not a one-time event,” he said. “In essence, it marks a step toward the mutual penetration of the two economies.”
By the time the actual deal was concluded in Tomsk, Angela Merkel had replaced Schroeder at the
signing ceremony, but the two sides’ enthusiasm was undiminished. Putin, indeed, was ebullient.
Hailing the deal as a “first in contemporary history,” Putin said, “It is the best example of the fact that Russia and Russian companies are ready for a deep and all-embracing collaboration...”
The two deals were indeed historic. They were the first time that Gazprom had ever allowed a foreign partner into its fields. The decision spoke volumes about the strategic importance of the “Wingas” joint venture in Putin’s eyes, both as the key to Gazprom’s plans in Europe, as well as the solution to Gazprom’s growing needs for new capital and technology, as its Soviet-era legacy of gas and pipelines began to fade.
The deal for Yuzhno-Russkoye led straight on to the notorious Nord Stream pipelines. With over 600 bcm of proven reserves (which further exploration soon increased to over
a trillion), the field was expected to begin producing in 2008, reaching an initial planned capacity of 25 bcm
within three years. It was meant to be the centerpiece of the North European Pipeline, which by 2006 was renamed “Nord Stream.” By 2011 the first string of the new pipeline had been laid at the bottom of the Baltic Sea and the first gas from Yuzhno-Russkoye had begun to flow to Germany.
In retrospect, the elaborate partnership between Gazprom and BASF/ Wintershall marked the high point
of Russian-German friendship and optimism, and also of Russia’s gas ambitions in Europe. It would have been hard to imagine that, seventeen years later, Putin would preside over its destruction.
The partnership evolves, but the partners pull in different directions
For nearly a decade it was a happy marriage. The two companies got on well – their executives and workers played football together, exchanged visits, and even vacationed together. Their interests – cheap gas imports
for one, an expanding gas market for the other, and a new export pipeline in-between – were comfortably aligned, and their joint company, Wingas, grew into one of Germany’s biggest gas businesses.
But the honeymoon did not last. In the wake of the 2008-9 financial crisis, European gas demand and prices
market in Europe; indeed, as the new West Siberian fields came online and
the NordStream1 pipeline reached
its targeted capacity of 55 bcm, a
second pipeline, NordStream2 was already being planned. Germany, and especially Wingas, remained the key to Gazprom’s plans for further expansion into European gas distribution and sales, which soon included the UK. In 2013, Gazprom bought the remaining half of Wingas from BASF, thus taking 100% control of the gas-trading function. But Wintershall remained a central part of the consortium of Western investors backing the NordStream2 pipeline, as well.
In short, by the time of the Ukrainian invasion, Gazprom and Wintershall remained as closely tied to one another as the proverbial Siamese twins.
But what followed only adds to the
deep mystery of the Kremlin’s self- destructive response, described in my previous post, “Putin’s Gas Suicide.”
Not only has Moscow discarded its ownership of Wingas – built after such sustained joint effort over the previous three decades of partnership – but it has now dropped a bomb on its upstream partnership with Wintershall in Siberia, an important key to its plan for the next generation of Russian gas and liquids in Europe, and the direct source of supply for the Nord Stream export system. Truly a case of gas suicide – just one of the many casualties of Putin’s invasion of Ukraine.
“Putin said, “It is the best example of the fact that Russia and Russian companies are ready for
a deep and all-embracing collaboration...”
dropped sharply. Unable to find buyers in Germany, Wintershall demanded that Gazprom cuts its prices. The Russians held out for the original agreement,
and the result was a fight. Gazprom was ultimately forced to yield, but at the cost of considerable loss of good will
on both sides.
Despite this, Gazprom continued to see a strong future for its pipeline-gas
Thane Gustafson is the author and co-author of eight books on Russian affairs, including most recently Wheel of Fortune: The Battle for Oil and Power in Russia (2012), The Bridge: Natural Gas in a Redivided Europe(2020), and Klimat: Russia in the Age of Climate Change (2021), all with Harvard University Press.
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