Is a U.S. Mining Company Funding a Violent Crackdown in Indonesia?

[SEE:  Indonesia Security Forces Opens Fire At Papua, New Guinea Anniversary Celebration]

Is a U.S. Mining Company Funding a Violent Crackdown in Indonesia?

American mining giant Freeport-McMoRan is paying the same local police who have used violence against mine workers asking for better wages

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Indonesia police clash with workers of mining giant Freeport-McMoran during a protest on October 10. Indonesian security forces fired on striking workers at Freeport-McMoran’s gold and copper mine after a protest turned violent early Monday, killing one, officials said. / AP

JAKARTA, Indonesia — Up in the remote mountains of West Papua, Indonesia, a road winds along steep cliffs, tall trees, and security checkpoints to the world’s richest copper and gold mine. More than four thousand meters above sea level, the mine is said to be so high that its mining trucks must be tracked via satellite, as clouds typically cloak them from view. Adding to the isolation, the American mining company, Phoenix-based Freeport-McMoRan, rarely allows visitors to enter its facilities. The access road is for official vehicles only, and foreign journalists are almost exclusively forbidden.

Yet despite its cover, Freeport’s giant Grasberg mine is on high alert. Production there has ground to a near halt as 8,000 workers strike for better wages, currently set between $1.50 and $3 an hour. Now in its third month, this strike is not only the longest in Indonesian mining history, but also one of the more violent, with sabotage to pipelines and deadly attacks on company employees. “We don’t feel secure to work at Freeport or to travel between the mine and our homes,” said Juli Parorrongan, a spokesman for the All Indonesian Workers Union, which organized the strike. “Too many people have been killed, but we don’t know who’s shooting us. We need the police to protect us.”

Freeport-McMoRan is one of the world’s largest mining companies, with interests across the globe and just under $19 billion in revenue in 2010. The Grasberg mine, which holds the world’s largest gold reserves, has been so profitable that Freeport is the Indonesian government’s biggest single taxpayer, with about 1.75 billion in taxes and royalties last year alone. An analyst for Forbes.com projected the protests may cost the firm $250 million in revenue; a company spokesperson citeddaily losses of $18 million to $19 million.

The strikers have a reason to be wary for their safety: Freeport is paying millions of dollars directly to the police officers who guard its mine, although Indonesia’s police force has a history of brutality and corruption. When the National Police chief admitted to these payments last month, he called it “lunch money,” writing it off as “operational funding given directly to police personnel to help them make ends meet.” A 2005 investigation by the New York Times found that individual military commanders had received tens of thousands of dollars, in one case up to $150,000, from Freeport. Ironically, the mining company allowed the officers to eat lunch (and breakfast and dinner) in the company mess hall.

Rights organizations fear the security payments are tainting police neutrality in the region, creating a conflict of interest for officers who are legally bound to protect the Indonesian people. “If they receive money from Freeport, it means their boss is not the Indonesian government, but rather Freeport — a private company,” said Poengky Indarti, executive director of the Indonesian Human Rights Monitor. “With this money, we worry that police tend to protect Freeport rather than protecting the workers.”

In October, police officers opened fire on striking Freeport workers who were trying to board Freeport buses from the nearby town of Timika to demonstrate by the mine’s gate. One striker died from gunshot wounds, at least six were injured, and a security officer later died from injuries sustained in the clash.

Freeport has given $79.1 million to police and military forces in the past 10 years, according to a group called Indonesian Corruption Watch.  Most of that funding has been through in-kind contributions such as food, housing, fuel, and travel costs, but officers have also received direct payments. A report by the NGO Global Witness shows that, between 2001 and 2003, Freeport gave nearly $250,000 to a controversial commander who in 1999 led military action in East Timor, where soldiers killed more than a thousand people.

Since then, the security funding has grown: Freeport’s financial documents show that the company paid $14 million to support government security forces in 2010, up from $10 million in 2009 and $8 million in 2008.

Eric E. Kinneberg, Director of Communications for Freeport, wrote in an email, “This provision of support is consistent with our obligations under our agreements with the respective governments, our philosophy of responsible corporate citizenship and the Voluntary Principles on Security and Human Rights.  We periodically review our support practices to ensure that they are appropriate, lawful and properly controlled.” Of the 2010 funding, he emphasized that “approximately 80% of that amount is non-cash, in-kind support” that is “necessitated by the remote posting.”

The Guards of Grasberg

Even under normal circumstances, Freeport’s Grasberg mine requires an unusually high level of security. Situated in the restive province of West Papua, the mine has long been a site of mysterious shootings by unidentified gunmen, and instances of violence have risen since the strike began in September. On November 18, gunmen wounded three police officers and killed a security officer with a shot to the head. Since early October, at least four workers and two residents have also been shot and killed by unknown gunmen near the main road.
The police say they cannot afford to protect the mine without money from Freeport, which hasreported a security team of 725 company guards and 3,000 government guards. “We cannot fully equip our members [assigned to guard Freeport] or provide patrol cars. But Freeport said they could and didn’t mind,” National Police spokesman Senior Commander Boy Rafly Amar told the Jakarta Globe, where I work as a copy editor and reporter.

Back when Freeport set up its Grasberg operations in the late 1980s and early 90s, soldiers received a wage below the poverty line. They were encouraged to pursue local business ventures to supplement their incomes, but some exploited the local population and engaged in illegal practices, such as panning gold from the Freeport area and promoting prostitution in nearby towns. “Such military activities would adversely impact [Freeport] employees and the surrounding community,” said Prakash Sethi, head of the New York-based International Center for Corporate Accountability, who traveled to West Papua between 2002 and 2007 to conduct an audit of the Grasberg mine’s operations at Freeport’s request.

The project allowed Sethi and a team of experts a rare look into the mining facilities, as well as access to interviews with company workers, community members and management. “It is my interpretation that … because the military did not have adequate facilities at the mine site, Freeport agreed to provide the military with ‘largely’ in-kind support in terms of housing and eating facilities,” Sethi wrote in an e-mail, adding that his audit did not examine how the military used those funds. “At the same time, some funding was provided for ‘miscellaneous expenses.'”

That interpretation seems to be supported by a statement in Freeport’s filings with the U.S. Securities and Exchange Commission in 2010: “From the outset of PT Freeport Indonesia’s operations, the government has looked to PT Freeport Indonesia to provide logistical and infrastructure support and assistance for these necessary services because of the limited resources of the Indonesian government and the remote location of and lack of development in Papua.”

The Problem with Pocket Money

In April, Papua Police’s chief of operations sent a letter to a local rights organization, the Commission for Missing Persons and Victims of Violence, which states that security allowances were not just “incidental and administrative,” and that each police officer receives $140 in direct payments every month.

The National Police has since confirmed and defended Freeport’s monthly allowances. “That’s only Rp 40,000 [$4.42] a day. Even if they want to spend it, the nearest shop is two and a half hours down the mountain,” police spokesman Boy Rafly Amar told the Jakarta Globe. Another police spokesman said police otherwise make only Rp 53,000 in a month, or $5.86.

It is unclear exactly how the payments are made, or how security forces use the funds. According to Sethi, Freeport used to give money to security commanders because lower-level officers lacked bank accounts, and then the commanders distributed the payments themselves. “The question was, how much was actually given to the soldiers and how much was kept by the commanders in the headquarters?” said Sethi. “I don’t know, and I think the company doesn’t know. If you ask the question, it would look like you’re insulting the professionalism of the commanders.”

In addition to creating a conflict of interest for officers during the labor strike, activists worry the money helps perpetuate human rights abuses in the region, as the police and military attempt to stamp out the separatist movement. Papua formally joined Indonesia in 1969 after 1,024 Papuans voted unanimously to relinquish their sovereignty during a UN referendum (though Papuans allege that the representatives, hand-picked by the Indonesian government, were held at gunpoint during the vote). As Papuans in the region continue to fight for independence, Human Rights Watch hasaccused security forces of engaging in a number of rights abuses, including extrajudicial killings and torture.

Police and military officers — who rely on Freeport for funding and equipment — say they would not be able to perform their security operations in the region without the American company’s support. In that same vein, activists argue that without Freeport, these officers would not be able to suppress the rights and independence aspirations of the Papuans to the extent that they do now.

Boycotting Bonn: Why Afghan War Conference Is Likely to Fail

Boycotting Bonn: Why Afghan War Conference Is Likely to Fail

Pakistan has announced its intention to boycott next month’s Bonn II conference on the Afghan War. Can a conference about the future of Afghanistan survive the absence of its most important neighbor?

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Supporters of Islamic organization Jamaat-ud-Dawa hold party flags and a placard during a demonstration against NATO cross-border attack in Lahore / Reuters

In the wake of a deadly U.S. attack on a Pakistani border post that killed 24 Pakistani soldiers, the Pakistani cabinet decided to pull out of the Bonn II conference. Foreign Minister Hina Rabbani Khar will not attend to protest the attack.

Bonn II, scheduled to take place next month, is meant to be a meeting of the international community to help craft Afghanistan’s future. It’s being held almost exactly 10 years after the first Bonn conference, which took place in December 2001. In a way, it will be a meeting on the last ten years of the conflict: are the fundamental questions asked a decade ago any closer to being answered?

But the Bonn II conference has met with significant hurdles. Besides Pakistan, Afghanistan’s largest neighbor, no one seems to know if Afghanistan’s other major neighbor, Iran, will participate (I spoke with officials in the State Department, who would neither confirm nor deny Iran’s attendance). U.S. Ambassador Ryan Crocker has told the Taliban they are not welcome to participate either, though German representatives have expressed interest in hosting some Taliban representatives. And Uzbekistan, which the U.S. is counting on as a transit corridor for its withdrawal plans, has been coy about its participation in any international conferences.

So a conference about the future of Afghanistan that is meant to leave a lasting, workable regional framework in place to manage the many diplomatic, economic, and security consequences of an American withdrawal might not include four of the most important participants: Pakistan, Iran, Uzbekistan, or the Taliban. And yet, the other 90 countries that participate hope to accomplish something.

The sad reality of the U.S. endgame in Afghanistan is that it is happening completely outside a consideration of Afghanistan’s politics. The war in Afghanistan is a fundamentally political war, and U.S. policymakers continue to ignore Afghanistan’s (and Pakistan’s) politics at tremendous cost. Theworst political excesses get identified and removed, but the strategic planning — what little there is — is happening within American preferences and beliefs, not Afghan ones.

This matters tremendously for a war that relies, ultimately, on Afghan buy-in, participation, and eventual replacement on the ground. The entire transition strategy, whereby discrete pieces of territory are handed over to Afghan control, is meant to bolster the “Afghanization” of the war. Yet it is happening without accounting for the larger political movements in the country.

For starters, trying to exclude the Taliban from the second Bonn conference, as Crocker has suggested he might do, is a terrible mistake. Part of the reason the Taliban regrouped in Pakistan, armed themselves, and set about systematically undermining Hamid Karzai’s government in 2003 and 2004 is because of their exclusion from the first Bonn conference in 2001. Continuing to exclude them, when they’ve created the country’s only functioning judicial system and operate at least local government as least as effectively as Karzai’s cronies do, would perpetuate the war.

The U.S. demands for the Taliban seem to amount to, give up your weapons and accept the current government and constitution as a precondition for any further negotiations. This is tantamount to a call for surrender first, before anything else happens, considering the biggest grievance the Taliban has is the very constitution it’s being told to accept (and the second biggest is the use of force to expand that unwanted constitution throughout the countryside).

In this light, Pakistan’s withdrawal from Bonn could be more or less a death-blow to the conference. Without Taliban participation, the conference’s utility was going to be severely limited. But missing the Taliban’s primary sponsor and support, in addition to the Taliban, and possibly the only other regional player with sufficient clout to alter Afghan politics (after Iran’s seizure of the British embassy today there is almost no hope of their attending), there is little hope for Bonn II to be anything other than an expensive piece of theater that will do little to advance or save the country.

Who knows, maybe Pakistan is doing us all a favor. At least now it’s undeniable that the conference is a showpiece and not something substantive. Perhaps, if we’re lucky, the uselessness of Bonn will help push policymakers into a new direction, one more focused on handling the region’s messy politics rather than smoothing ruffled feathers in the West.

Insane Saudi Religious Authorities Claim That Women Drivers Become Promiscuous, Turn Men Gay

Saudis will lose virginity if women drive: clerics

ANI
London

Allowing women drivers in Saudi Arabia would result in ‘no more virgins’ the country’s highest religious council has warned. A ‘scientific’ report has alleged that relaxing the ban on women drivers, would also see more Saudis – both men and women – turn to homosexuality and pornography.

The astonishing conclusions were deduced by Muslim scholars at the Majlis al-Ifta’ al-A’ala, Saudi Arabia’s religious council, working in conjunction with Kamal Subhi, a former professor at the King Fahd University.

The scholars, in their report, evaluated the possible impact of repealing the ban in Saudi Arabia, the only country in the world where women are not allowed behind the wheel.

The report was delivered to all the 150 members of the country’s legislative body.

According to the account, allowing women to drive would ‘provoke a surge in prostitution, pornography, homosexuality and divorce’ the Daily Mail reported.

The scholars claimed that within ten years of lifting the ban, there would be ‘no more virgins’ in the Islamic kingdom.

They further corroborated their point of ‘moral decline’ by observing that in other Muslim countries where women are allowed to drive the decline is already visible.

In the report, Professor Subhi, exemplified the point by describing what he experienced while sitting in a coffee shop in an unnamed Arab state.

“All the women were looking at me,” he wrote. “One made a gesture that made it clear she was available… this is what happens when women are allowed to drive,” he concluded.

The shocking report came after Shaima Jastaniya, a 34-year-old Saudi woman, was sentenced to 10 lashes with a whip after being caught driving in Jeddah.

Although there have been strong protests across the country about the sentence and law in general, resistance to reform and change remains strong among conservative royals and clerics.

Karzai to Taliban: talk peace and I’ll protect you from Pakistan spies

Karzai to Taliban: talk peace and I’ll protect you from Pakistan spies

Afghan president’s failed attempt to ‘peel off’ insurgents with families living under ISI sway is taken up by US special envoy

Taliban fighters arrange their weapons after joining Afghan government forces at a ceremony in Herat. But efforts to involve their leaders in peace talks are stalled. Photograph: Aref Karimi/AFP/Getty Images

Taliban leaders living in Pakistan were offered resettlement packages for their families in Hamid Karzai‘s failed attempt to find peace partners free from the influence of Pakistani spies, Afghan officials have revealed.

Officials said the Afghan president’s effort to find representatives to talk for the insurgents were scuppered by their unwillingness to jeopardise families given sanctuary in Pakistan, where they live under the sway of the Inter-Services Intelligence agency (ISI), which is accused of supporting the Taliban.

The initiative highlights the extraordinary grip Pakistan has over the Taliban leadership. And it showed the desire of the Karzai government to peel away a faction within the Quetta Shura, the insurgency’s main decision-making body.

One diplomat in Kabul said families of high-ranking Taliban are often moved around Pakistan against their will and live under a loose house arrest. To overcome the problem the Afghan government, with Nato backing, hatched secret plans to move entire families to protected areas in Afghanistan.

“Such an operation would be difficult but not impossible,” said a senior Afghan government official who did not wish to be named. “We have a red line on allowing our security forces to conduct operations inside Pakistan, but we were prepared to move the families. It would not have been a James Bond-style operation. We would have just used a few henchmen.”

The effort never came to anything, he said, and the most recent offers to move families are on hold after the assassination of Burhanuddin Rabbani, Karzai’s peace envoy. After Rabbani’s death in September the Afghan president abandoned efforts to talk to the Taliban, saying he would engage directly with Pakistan.

Foreign experts and Afghan officials say the issue of families is a big stumbling block to peace efforts, giving the ISI an iron grip over the Taliban. “Every Taliban commander has his family in Pakistan,” said a former Afghan official who has met the insurgents’ representatives in the past.

He said the ISI tried to ensure all high-ranking Taliban kept their families in Pakistan. That included Quetta Shura members, frontline commanders and the “shadow governors” running the Taliban’s alternative government in the Afghanistan’s 34 provinces.

“It is a deliberate policy of ISI, who cannot trust people to fight unless they bring their family to Pakistan,” the official said. “Any Taliban leader who wants to do something different will have to think twice because the family will be at risk.”

That is what happened when it was revealed earlier this year that a Taliban functionary, Tayeb Agha, had been holding secret talks with the Americans.

“The story is that his family house was immediately surrounded and secured by the Pakistani police,” said Antonio Giustozzi, research fellow in the Crisis States Centre at the London School of Economics. “His father was put under house arrest until Agha returned to Pakistan.”

“There is a group interested in talks,” a western official said. “They are fed up with the way they live: they know they are being used by Pakistan and that they can be manipulated at a moment’s notice.”

Karzai has struggled to turn such disillusionment into substantive talks, and has suffered a series of setbacks in his efforts to talk to the other side.

In February 2010, Abdul Ghani Baradar, one of the Taliban’s most senior leaders who is from Karzai’s Popolzai tribe, was arrested in Pakistan after he was found to have been talking unilaterally to the Afghans. Islamabad refused to hand over Baradar’s young son to Afghan custody, despite lobbying by Kabul.

Last year it was revealed that a man posing as a Taliban envoy who met the Afghan president was an impostor.

The final disaster for Karzai’s policy was when a Taliban suicide bomber killed Rabbani. Although the peace process is now generally thought to be on hold, foreign diplomats say the US has kept open lines of communication with the Taliban. Unlike the rounds involving Agha, the latest talks are being kept as secret as possible.

One American official said the process is being led by Marc Grossman, the US special representative to the region, who remains convinced a Taliban group can be “peeled off” from Pakistani influence. “Details about this process are in very short supply,” said Giustozzi. “But the fact that it is continuing suggests the Pakistanis are allowing it to happen and have their own people involved. In that sense, it has their backing.”

Pennsylvania Families Got Fracked–Must Find Own Water After Drillers Let Off the Hook

A shale-gas drilling and fracking site in Dimock, Pennsylvania.

[SEE:  A Colossal Fracking Mess]

Driller to stop water to families in Dimock, Pa.

By MICHAEL RUBINKAM, Associated Press

ALLENTOWN, Pa. (AP) — Families in a northeastern Pennsylvania village with tainted water wells will have to procure their own water for the first time in nearly three years as a natural-gas driller blamed for polluting the aquifer moves ahead with its plan to stop paying for daily deliveries.

Houston-based Cabot Oil & Gas Corp. ended delivery of bulk and bottled water to 11 families in Dimock on Wednesday. Cabot asserts Dimock’s water is safe to drink and won permission from state environmental regulators last month to stop paying for water for the residents.

A judge on Wednesday declined to issue an emergency order compelling Cabot to continue the deliveries. The judge, who sits on the state’s Environmental Hearing Board, set a Dec. 7 deadline for arguments on a second, related petition filed by lawyers for the families.

The decision left residents who don’t think their water is safe scrambling to find alternate sources.

“We are in desperate need here,” said Scott Ely, 42, who is married with three young children at home.

Ely, a former Cabot employee, said no option was appealing. A creek runs through his property, but the water hasn’t been tested and his wife doesn’t want it piped into their brand-new home. The Cabot contractor who had been supplying their water quoted him a price of $100 a day, he said.

“We’re sitting here with no answers, and I cannot believe Cabot got away with this,” he said.

State regulators previously determined that Cabot drilled faulty gas wells that allowed methane to escape into Dimock’s aquifer. The company denied responsibility, but has been banned from drilling in a 9-square-mile area of Dimock since April 2010.

A Cabot spokesman said Wednesday that the company has worked diligently to resolve the problems in Dimock.

“Cabot has reconditioned water wells, drilled new water wells and installed treatment systems that work properly and effectively. Additionally, we have tested the water and the results have as proven the water meets federal safe drinking water standards,” George Stark said via email.

The families dispute their water supply is safe and say the treatment systems that Cabot has installed in some homes don’t do an adequate job of cleaning it.

As residents prepared to be cut off Wednesday, activists launched an effort to keep them supplied with water.

Craig Stevens, who lives near Dimock and is an outspoken critic of the gas industry, put out a call for volunteers with tanker trucks to deliver bulk water to the residents. He said his goal is to get at least 20 volunteers to commit to one day a month each. Working with Stevens, Pennsylvania-American Water Co. said it will set up an access point at Lake Montrose, a municipal water supply several miles from Dimock.

The state, Stevens said, has “turned its back on the people of Dimock.”

Several environmental groups, meanwhile, urged the Pennsylvania Department of Environmental Protection to reverse its decision to allow Cabot to stop delivering water, saying the company has not met its legal obligation to restore the residents’ water supply.

“The department’s decision is irresponsible given that Dimock residents have relied on the trucking of temporary fresh water for drinking, bathing and other household uses,” Jeff Schmidt, director of the Sierra Club’s Pennsylvania chapter, wrote to Pennsylvania Environmental Secretary Michael Krancer this week. “The residents’ water supplies have not been restored, either in quantity or quality.”

Dimock, a rural community about 20 miles south of the New York state line, became a flash point in the national debate over unconventional gas drilling in deep shale formations after 18 residential water wells were found to be tainted with methane. Eleven families have sued Cabot in federal court.

Kyrgyzstan’s ruling coalition collapses

Kyrgyzstan’s ruling coalition collapses

By Leila SaralayevaAssociated Press

BISHKEK, Kyrgyzstan—Kyrgyzstan’s fragile ruling coalition collapsed Friday, one day after the new president took office — a development certain to spur frenetic political bargaining in the Central Asian nation where both the U.S. and Russia have key interests.

Social Democratic Party faction leader Chynybay Tursunbekov said his party decided to pull out of the coalition formed in the months after last October’s election because of disagreements with its partners on judicial, political and economic reforms.

“The right thing to do is for the president of Kyrgyzstan to give Social Democratic Party faction a mandate to form a new coalition,” Tursunbekov said.

Almazbek Atambayev’s inauguration as president Thursday will help to ensure political continuity despite the legislative discord. He is expected to charge parliament with forming a new coalition in the coming days.

Kyrgyzstan’s fate is of interest to both Russia and the United States.

The former Soviet nation on China’s mountainous western border hosts a U.S. air base crucial to operations in nearby Afghanistan and has been the focus of competition between Washington and Moscow for regional influence. Russia also controls an air base outside the capital.

Failure to reach swift agreement on a new coalition partnership could hamper desperately needed economic reform. Although relatively rich in gold reserves, Kyrgyzstan struggles with chronic hardship exacerbated by rampant corruption and crumbling infrastructure.

Atambayev has promised to combat graft, although many believe any such efforts will be hindered by political infighting based on clan and regional loyalties.

Atambayev is likely to favor inclusion of the Social Democratic Party, of which he used to be the leader, in the new coalition.

Tursunbekov said the new coalition could include as many as four parties, although it was unclear to which parties he was referring.

The fall of the coalition — comprised of an unlikely alliance between the Social Democratic Party, the nationalist Ata-Zhurt party and pro-business Respublika — had long been expected amid rumored divisions within the five parties in parliament. The other parties with seats in the legislature are the law-and-order and Russia-friendly Ar-Namys party and left-leaning Ata-Meken.

Kyrgyzstan adopted a new Constitution last year that boosted the influence of the parliament and watered down the executive power of the president.

Atambayev hinted ahead of the election he won convincingly in October that the Constitution may be amended yet again, leading some to speculate he may favor a return to a stronger presidency.

————–

Associated Press writer Peter Leonard contributed to this report from Almaty, Kazakhstan.

Empty Pipelines

Empty Pipelines

by Edward Lucas
CEPA Non-Resident Fellow and International Editor of The Economist Edward Lucas assesses Europe’s geopolitical climate and considers the shifting views of regional energy security.
Scaremongering and complacency are the two poles of Europe’s energy politics. Wind back ten years and the complacent camp had the upper hand. Russia was seen almost everywhere as a friendly country that reliably delivered large amounts of gas to its Western European customers, such as Germany’s Ruhrgas. Admittedly, Russia’s gas industry was old-fashioned and wasteful, but the country was hungry for Western know-how and investment. If the giant state-owned Gazprom didn’t modernize, then thrusting competitors such as the Yukos Oil Company would fill the gap.

Soon after, the worries started. Under then-President Vladimir Putin, Russia began to seem all too willing to use energy as a political weapon, cutting off oil supplies to Lithuania and Latvia for spurious reasons. Corruption spiralled upwards: having initially cracked down on shady intermediaries such as Itera that were looting state-owned energy companies, Putin’s Kremlin then set up a whole lot more of them — most notoriously RosUkrEnergo, a firm with no reserves, pipelines or storage capacity, which managed to turn over billions of dollars in the Russian-Ukrainian gas trade. From 2005 onward, rows between Moscow and Kyiv over the murky profits of that deal led to shutdowns in gas supplies to Western European customers. Russia’s reputation for reliability was in tatters. Initially, countries such as Germany remained unbothered: these hiccups were problems for the Eastern Europeans, stemming from their own irritable attitude to Russia. Serious countries such as Germany had nothing to worry about. Former Chancellor Gerhard Schröder epitomized that approach, heading straight from the Federal Chancellery to a lucrative job with Nord Stream, a Russian-German pipeline consortium across the Baltic Sea, shortly after he stepped down as Germany’s head of government in 2005. As Germany leaned toward Russia, the voices from the countries in-between became panicky. The then Polish Defense Minister, Radosław Sikorski, even indirectly compared the project to the infamous Molotov-Ribbentrop Pact.

Amid Central Europe’s growing worries about Russia, the search for alternatives intensified. From 2002 onward, the European Union (EU), with strong American support, began pushing for diversification, backing the Nabucco pipeline which aimed to bring gas from Central Asia and the Caspian to Central Europe, via Turkey and the Balkans. Russia responded with its own pipeline, South Stream.
By the end of the decade, the scaremongers had triumphed and the complacent camp was in disarray. Russian gas had proved to be expensive, unreliable and a honeypot for corruption. The old German-style model of integrated energy companies was under lethal attack from the European Commission’s competition directorate. European money was also paying for new North-South interconnectors, meaning that countries such as Poland and Hungary no longer depended solely on gas supplies from the East: they could import from anywhere.

Russia’s woes were further exacerbated by technological change. Liquefied natural gas (LNG), once scarce and expensive, became plentiful and cheap. One reason was the growth of shale gas production in America. Billions of cubic meters (bcm) from Qatar, Trinidad, Indonesia and other producers, once destined for America, were now available on the world market. The cost of tankers and delivery terminals plunged as well. On top of that came the discovery of large quantities — up to 5.3 trillion cubic metres (tcm) — of shale gas in Poland, and possibly other countries in the region too.

Adding insult to injury, in September 2011, the European Commission launched a series of raids on Gazprom’s offices in Europe, acting on suspicions that the Russian gas giant is engaged in systematic cartel-like behavior and market manipulation. One target in the raids was Gazprom’s Czech subsidiary Vemex, which had just acquired a stake in a local energy retailer.

For countries such as Lithuania and Estonia, which have been trying to wrest control of their national gas systems out of Russian monopoly hands, the results of this probe cannot come soon enough. In November, Mr. Putin devoted time at his annual Valdai reception for foreign commentators to complain sharply about what he portrayed as the EU’s attempt to force Russia out of the European gas market. That would have been unimaginable in previous years. Russia no longer has the whip-hand in a market it once considered easy to manipulate.
Russia has also grossly misplayed its gas diplomacy closer to home. It has infuriated Turkmenistan — the second biggest source of gas reserves in the former Soviet Union — with its bullying tactics. The Turkmen government has now built a pipeline to China, across Uzbekistan, with a spur planned to Kazakhstan. The Kremlin has also alienated the pro-Russian leadership in Ukraine. Only the completion of the Nord Stream pipeline in September gave Russia a cause to cheer — and even that achievement is vulnerable to EU competition law: the gas that Nord Stream delivers will have to compete with other suppliers, rather than slotting into cozy downstream contracts as originally planned.

Yet the scaremongers still have plenty to worry about. In the wake of the Fukushima nuclear disaster, European countries have frozen their plans to build new nuclear power stations and are closing down the ones they have. Renewable energy is nowhere near filling the gap, and to prevent the lights from going out, countries such as Britain, Germany and the Netherlands will need to import more gas for power generation — one estimate is that gas demand will rise by 30 bcm annually. That gives Russia a chance to make a comeback, especially if the world gas market tightens.

Another big headache is the EU’s so-called Southern corridor, the attempt to secure a gas pipeline via Turkey. Nabucco, much-delayed, now looks to be in serious trouble due to rising costs and continued uncertainty about its gas sources. Azerbaijan has indicated that it would prefer a different pipeline for the gas from its Shah Deniz field, which was intended to kick-start Nabucco. Russia too is flexing its muscles in the Caspian Sea, which is the supposed source for Nabucco’s long-term supplies. Tellingly, the United States has shifted its position, from unambiguous support for Nabucco to a more nuanced backing of any of four possible projects — the other three being the Trans-Adriatic pipeline, the Italy-Greece interconnector and an inexpensive Turkish pipeline that seems likely to work.

But the biggest worry remains disarray in the EU. As the Euro-zone crisis consumes political capital, the authority of the Commission in other areas, such as its ability to police the single market, frays. Money is tight, meaning that few politicians want to splurge on expensive projects such as Nabucco. Many will argue that gas is increasingly becoming a commodity like oil: freely traded on world markets, and of no great concern for politicians. Russia may be a nuisance, but it is not a menace. The scaremongers have had their day. It will be the complacent lobby’s turn soon.

Edward Lucas is International Editor of the Economist and a non-resident Fellow at CEPA. He has been covering the Central and East European region since the mid-1980s.