Pipeline prudence

By , Fredrick H. Alden, a former consultant to the US State and Energy Departments, is now a consultant to the World Bank.

The outright French, Italian, and British rejection of US attempts to block the Soviet pipeline reflects the short and long term nature of the pipeline problem. In applying strong-arm tactics, the administration has caused a rift in the Alliance and will probably achieve little else. At most, it may delay the deal for a year or two. Once the pipeline is in place, however, there is the real danger that the Soviets could drive a permanent wedge in the Alliance. This is the box the administration is in.

Despite what the Europeans say, the pipeline clearly affects our collective security. The worry is increased European vulnerability to simultaneous oil and gas interruptions and hence greatly increased Soviet leverage.

The scenario goes like this: Western oil supplies from the Middle East are cut off by direct or Soviet-inspired moves. The US prepares to act in concert with Europe. The Soviets counteract by neutralizing the Europeans with the threat of an immediate gas embargo. Hit with the serious economic impacts of a sharp oil disruption, in addition to a potential gas curtailment, the Europeans could become even more edgy about adopting a firm anti-Soviet stand. Not surprisingly, Pravda calls the pipeline an energy ''bridge'' that would make Europe less ''captive'' to US Mideast policy. Those who think that the prospect of hard currency earnings are going to stop the Soviets when the chips are down are just plain wrong.

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Absent a Soviet engineered energy squeeze, gradual Soviet influence in Europe is also cause for concern. European addiction to a steady stream of Soviet gas could make the Europeans more reluctant to adopt policies that the Soviets find problematic in other areas. A recent EEC report underscores the potential impact; when the gas deal is completed Italy could depend on the Soviets for 35 percent of gas consumption, West Germany 34 percent and France 26 percent. This dependence is greatly compounded by the fact that by 1990 non-EEC gas will account for as much as 46 percent of supplies compared to only 26 percent in 1981. In other words, potential exposure to gas cut-offs becomes progressively worse because of the sharp increase in external sources of gas as a whole.

Finally, the credit provided by the Europeans to build the pipeline is a gold mine for the Soviets; where can you get financing at below 10 percent and expect to repay the loans with high priced gas at fixed price in a declining market? This subsidy is shameful but even more serious is the failure to factor into the total pipeline cost the measures that the Europeans should adopt to protect against simultaneous oil and gas interruptions and Soviet leverage. This is in effect the cost of making Soviet gas ''safe'' for Europe and the Alliance and as such should be included in the delivered cost of the gas. If such costs are factored in, Soviet gas would be uncompetitive with Norway's vast but isolated deposits, US coal, perhaps Canadian gas, and who knows what else.

Despite these real dangers it is apparent that overt pressure applied against the allies is likely to enhance rather than neutralize Moscow's leverage and risks precipitating the very thing the administration sees as the greatest danger; a fragmented Alliance.

The first step in an effective strategy, therefore, is to change our approach. We can accomplish much more if we stop trying to completely kill the deal by crude threats or empty promises. It has not worked, it will not work. We must recognize the reality of a pipeline of sorts and work productively with the allies in a joint effort to counter and anticipate the strategic impacts.

The administration needs to recognize that the pipeline is not inherently imprudent; given the right measures and precautions the security objections can be surmounted. In practical terms this means insisting that the risk threshold be lowered by precautionary emergency measures such as increased oil and gas stockpiles, fuel switching capacity and joint security measures to minimize the potential of Middle East instability and cushion supply curtailments. We need to press hard for some type of fee or tariff on Soviet gas imports (perhaps in conjunction with a US tariff on oil) so that revenues to finance measures to counteract Soviet gas dependence are directly instituted and financed. European talk of a ''safety net'' would ring less hollow if they really showed how they planned to pay for it.

Everything must be done to reduce the size of the deal and minimize the need for similar energy projects in the future. This means putting our money where our mouth is and devoting some dollars to help develop non-OPEC and non-Soviet supplies. As a start we should offer to help finance Norwegian and Canadian gas for Europe and US coal exports while lifting restrictions to exports of crude to Japan. The rhetoric of reliance on the market for energy sounds great until one realizes that five major oil companies, three of them American, own two-thirds of Rhurgas, the leading promoter of the Soviet deal.

The pipeline issue also demonstrates the need for a new allied mechanism to communally manage one of the main strategic issues of the '80s - Western dependence on vulnerable Middle East energy supplies and possible Soviet moves to precipitate an interruption or at least take advantage of it. The International Energy Agency is fine and good but it is certainly not the forum to tackle the pipeline nor the wider security, economic, and military ramifications. Ad hoc bilateralism has certainly not worked. A nucleus of allies to address the problems of Persian Gulf and East-West energy trade is needed. As a start the group could tackle the pipeline issue by including the main project participants (Germany, Italy, and France), potential future equipment suppliers (Japan and Great Britain), and potential gas suppliers (Norway and Canada for a start.)

The group would be charged with assessing problems presented by the pipeline and develop long term alternative energy supplies and address security implications of energy trading patterns.

What is really most troublesome about the whole pipeline dilemma is the clear evidence it provides that the Reagan administration still lacks an energy strategy. Like it or not, energy is now central to security policy. This link is one that has still not been made at the White House. Amidst all the talk of an expanded defense budget and greater preparedness, ignoring the energy component of the security problem is foolhardy and dangerous for both the US and the alliance.

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