Germany’s trade, financial, and investment policies towards Russia, notably on the issue of natural gas, have contributed to re-shaping the post-Soviet Eastern European geo-economic landscape. As a result, Ukraine could become a hostage of Berlin’s recent Ostpolitik in the possible case that the tensions between Moscow and Kyiv further increase.

How should Berlin behave towards Moscow in light of the increasingly authoritarian trends in Putin’s third presidential term? Germany’s policy towards Russia has been tested, over the last months, regarding its ethical and political implications. In contrast, the geostrategic intricacies of Germany’s close economic cooperation with this post-imperial autocracy have received less attention. What consequences for Eastern Europe, as an economic and political space, does Germany’s close cooperation with Russia have? Which security policy risks are involved in the participation of German companies and public figures in the geo-economy of Eastern Europe – especially the participation in Russia’s well-known gas pipeline mega projects?

On the surface, these joint ventures seem to be purely Western European-Russian undertakings. Their geopolitical effects are however, closely linked to the future integrity and sovereignty of some non-Russian former Soviet republics – most of all Ukraine. While this nexus remains mostly unknown to the German public, the close connection between German-Russian economic cooperation and the future of the Ukrainian state is an obvious issue for Ukrainians.

Clearly, the German politicians and managers involved in Moscow’s projects would strongly reject being associated with Russian neo-imperial schemes. Those who are familiar with the way present Kremlin domestic and foreign politics work will, however, know that the activities of the major Russian state-owned corporations do not strictly abide by economic principles. This is especially true of the current biggest player, the Gazprom corporation, which is involved in various politically as well as geo-economically important projects in and outside of Russia. In this connection – as the current dispute over the gas price for Ukraine illustrates – profit seeking and geopolitical calculus do not necessarily contradict each other.

Everybody with elementary knowledge of Russian affairs would also acknowledge that one of the Kremlin’s priorities in Russia’s so-called “near abroad” is Ukraine. In the Middle Ages, the Kyiv Rus was the cradle of all three major Eastern Slavic nations – the ‘Great, Small and White Russians’. As a result, Ukraine’s secession from the Russian empire has been creating considerable phantom pains, in the Russian people’s collective soul, during the last 20 years. Particularly difficult to digest, for many Russians, is the loss of the famous Black Sea peninsula of Crimea, which is today dominated by ethnic Russians, plays a significant role in Russian historical mythology, and has also special importance for Russia in military-strategic terms, as well as a touristic destination. After the fall of the Soviet Union, Crimea fell – by mere coincidence – to Ukraine and not to Russia. A main aim of the Kremlin’s foreign policies has thus been, especially under Putin, to forge a new, close relationship between Ukraine and Russia. Ideally, the Kremlin would like to establish a new union between the three Eastern Slavic republics (along with some other former Soviet states) – under, of course, Moscow’s leadership.

Against this background, the combination of the substantial – although mostly resource-based – economic potential of Russia with the commercial interests of certain German politicians and entrepreneurs has led to an unhealthy situation, in which German companies appear to assist Moscow in its reshaping of the East European geo-economic landscape. The Kremlin skilfully plays on Germany’s lack of knowledge, missing concern or purposeful self-delusion about the deeper motives of Russian foreign economic policies towards the other former Soviet republics.

The most prominent example is the Baltic Sea ‘Nord Stream’ – the world’s longest underwater gas pipeline and one of the biggest infrastructure projects in the history of Europe. It directly transports Russian gas to Germany at the bottom of the sea. This Russian gas would otherwise largely be flowing through Ukraine – and such a diversion is exactly the main purpose of the costly pipe, for the Kremlin. In this connection, it is convenient for Russia that, in the Soviet Union, the once significant Ukrainian gas fields were largely exhausted first, while many of the conventional Siberian deposits remained untouched, for a long time. Russia’s gas reserves are today the largest in the world, whereas Ukraine’s cannot satisfy domestic demand.

It is also possible that the even more expensive parallel plan for building ‘South Stream’ (or a similar additional project, for instance, again in the Baltic Sea) will be realized, during the next years. The creation of a second underwater pipeline at the bottom of the Black Sea would have even more far-reaching implications for the relations between Russia and Ukraine. In combination with ‘Nord Stream’ and ‘Beltransgaz’ (the Belorussian pipeline already controlled by Gazprom), ‘South Stream’ would turn Ukraine’s network of gas pipelines and biggest strategic asset, according to Gazprom’s CEO Alexej Miller, into “scrap”. This would result in a yet stronger power shift in Eastern Europe than the gradual deployment of the first two ‘Nord Stream’ segments in 2011-2012 has already caused. Taking place at the EU’s doorstep, such an important change in the constellation of economic might in Eastern Europe cannot be ignored.

A number of German companies and public figures have embarked in unusually close cooperation with the Russian state or firms close to the government. The prominent role of two veteran politicians of Germany’s Social Democratic Party in the Gazprom business empire is especially surprising: since 2005 Gerhard Schröder, the FRG’s former Chancellor, has been the chairman of the supervisory board of the management company of Nord Stream, while the former SPD mayor of Hamburg, Henning Voscherau, has exercised the same role in the South Stream Transport AG since April 2012. It is astonishing how blatantly high representatives of German social democracy support a state-owned company of Putin’s authoritarian regime and its dubious geo-economic projects. The Ukrainian national democratic opposition, moreover, associates this phenomenon with the peculiar relationship the social-democratic faction of the European Parliament maintains with the Party of the Regions – seen by many in Kyiv as having been selling out Ukraine to Russia, since Yanukovych became President of Ukraine in 2010.

The ominousness of the special political and economic relationship a part of Germany’s elite has with Russia is, of course, known and occasionally a topic of snappy journalistic commentary, in Berlin. However, because the political and ethical ambivalence of this relationship is so obvious, serious discussions about its potential collateral damage, geostrategic implications and long-term consequences occur – if at all – mostly in the quiet. In Ukraine, on the other hand, the seeming German-Russian political friendship and considerable economic links between the two former empires have become a consistent feature in the media. There is a Ukrainian perception that Germany is conducting its energy policies in Eastern Europe at the cost of Ukrainian sovereignty. To be sure, this accusation is, as such, misleading.

Yet, one has to take into account that the Ukrainian state is still young and therefore fragile. Whatever appears to jeopardize the recently gained independence is closely watched by the nervous Ukrainian intelligentsia. The impatience and occasional exaggerations in Ukrainian assessments of Germany’s Russian policy are due more to suspicion about the intentions of the Kremlin towards Ukraine, than to mistrust towards Berlin. After all, the economic justification for the elaborate underwater gas pipelines is awkward, given the various new – for instance, ecological – risks they entail, and Ukraine’s high transport infrastructures (although in need of renovation).

The total cost of Nord Stream and South Stream could account to up to 40 billion euro. There are alternative strategies to secure Europe’s gas supply, which would be cheaper than the expensive offshore projects. With the completion of Nord Stream at the end of 2012, the overall transport capacities for gas from Russia towards the EU were of ca. 250 billion cubic metres even though Russia’s actual gas exports to the West in 2011, for instance, amounted to merely 112 billion cubic metres.

The gas transport diversions via sea are sometimes justified by the fact that Russia has historically been Western Europe’s prioritised partner, because Moscow has never, even during the Cold War and despite repeated political escalations, cancelled the supply of energy to the West. It remains unclear, however, why the USSR’s reliability to deliver energy is today accredited only to Russia, but not to Ukraine and Belarus, which were also parts of the USSR. Another classical argument – the cynical comparison between Ukrainian pluralistic instability on the one hand and Russian authoritarian stability on the other – has lost some of its power since the start of mass protests in Moscow in December 2011. This argument also ignores the fact that Russia has been involved in various military actions in the country and abroad in the last 20 years, while Ukraine has developed, despite the occasional brawls in Ukraine’s parliament, surprisingly peacefully since 1991.