Dutch Ignored Warnings About Relying on Russian Gas
The Dutch government was warned many times Russia could not be trusted and bought its gas anyway.
Germany is primarily to blame for Europe’s dependence on Russian gas. As I wrote here two weeks ago, it simultaneously phased out coal and nuclear, couldn’t possibly replace both with renewables, relied on natural gas and hid behind the excuse that buying gas from Russia was just business. If there were political implications at all, successive German governments argued they would be positive. Trading with the Soviet Union had paved the way for détente, and at the time Americans had also opposed Ostpolitik. Why listen to them now?
But this time the Americans were right. And Eastern Europeans. And the many Western experts who tried to warn their governments that they were relying on an unreliable regime and funding Vladimir Putin’s war machine.
My country is no exception. When I was doing research for Wynia’s Week about Gazprom’s sprawling business interests in the Netherlands, I discovered that the Dutch government had been repeatedly warned through the years against relying on Russian gas imports.
Hubert Smeets, the co-founder of Raam op Rusland, which publishes in Dutch and English, told me the Netherlands should have looked for alternatives to Russian gas, especially after the annexation of Crimea and the downing of Malaysia Airlines Flight 17 in which 193 Dutch nationals were killed. “It is unbelievable that the opposite happened under Prime Minister Mark Rutte.”
Only now that Russia has dramatically escalated its war in Ukraine do most Dutch political parties want to stop buying Russian gas. (And are they willing to raise defense spending.)
They should have paid more attention in the past. The warning signs were there.
From exporter to importer
2014 was not just the year of Crimea and MH17; it was also the year in which the Dutch government finally acknowledged drilling for natural gas had caused violent earthquakes in the northeastern border region of Groningen.
Groningen sits on one of the world’s largest gas fields. It made the Netherlands Europe’s largest producer and exporter of gas after Russia. Production peaked at almost 100,000 cubic meters in the 1970s and hovered between 70,000 and 80,000 bcm per year until 2014. Production fell to 20,000 bcm in 2021. It is meant to reach zero by the middle of this decade.
Dutch gas use remains stable at above 40,000 bcm, requiring the country to import half the gas it consumes. Half the imports come from Norway. Official figures suggest another third comes from “Germany”, but since Germany doesn’t produce gas this be Russian gas piped through Germany.
The Netherlands imports more than it needs. Imports totaled over 40,000 bcm last year. That’s because it remains an exporter. Long-term contracts guarantee “Dutch” gas supplies to Belgium, Germany and the UK. The Dutch import gas, because they export gas.
That’s not a case of bad luck. It’s policy. Officials might blame the “unexpected” fall in domestic production in Groningen, but in fact they began planning for just such an eventuality twenty years ago. Russian gas was always going to make up the difference.
Gas roundabout
Dutch-Russian gas relations go back to 1967, when Soviet officials visited Shell — at the time a co-owner of the Groningen field — to learn about the European gas market.
After the collapse of the Soviet Union, George Verberg, formerly an official in the Ministry of Economic Affairs, by then the head of the Dutch gas monopoly Gasunie, visited his Gazprom counterpart in Moscow to open commercial relations. Verberg would sign a twenty-year contract with Gazprom in 1996.
It was around that time that Gasunie, Shell and the rest of the Dutch energy industry endorsed a plan to convert the Netherlands into the gas “roundabout” of Europe. They anticipated production in Groningen, and smaller Dutch gas fields in the North Sea, would fall. To keep their lucrative domestic and export contracts, the companies proposed to import Norwegian and Russian gas and sell it to Belgium, France, Germany and the UK.
This suited Moscow. Gazprom, working in partnership with Germany’s Wintershall, was building new pipelines through Belarus and Poland. The Dutch gas roundabout would enable them to sell gas as far away as England.
In 2005, the Dutch energy lobby published Gas for Tomorrow, a plan that called for importing more Russian gas. It recognized American concerns about relying on Russia, but dismissed these by pointing out the country has always been a “stable” supplier. The Dutch government adopted the plan almost verbatim the following year. Gasunie took a 9 percent share in Gazprom’s newest pipeline, Nord Stream. In return, Gazprom became a co-owner of the North Sea pipeline running between the Netherlands and the UK.
Putin’s 2008 invasion of Georgia didn’t change minds in The Hague. Nor did the 2008-9 Ukrainian gas crisis, which left swathes of Central Europe in the cold. Nor did the obviously rigged 2012 Russian election, which returned Putin to the presidency after a four-year prime ministership.
Nord Stream 1 was completed and Gazprom planned two more pipelines: Nord Stream 2, doubling the Baltic Sea pipeline’s capacity, and South Stream, connecting Russia to Bulgaria through the Black Sea. Both would allow Gazprom to bypass Ukraine, which still hosts the largest gas pipeline into Europe. Putin asked Verberg’s successor at Gasunie, Marcel Kramer — who had signed the Nord Stream 1 contract for the Netherlands — to become CEO of South Stream. The Dutchman accepted.
Warnings brushed aside
By then it was becoming clear to everyone except the Dutch and German governments that Putin was no democrat and all too willing to use countries’ dependence on Russian gas as a weapon.
The internal watchdog of the Dutch Ministry of Foreign Affairs warned in 2012 that, unlike the Netherlands, Russia did not distinguish between energy and foreign policy. Unlike the Ostpolitik of the 1970s, gas deals with Russia had not led to reforms. Putin’s regime was not opening up. Russia had no taken steps to protect the natural environment in areas where it drilled for oil and gas.
The Dutch Court of Audit was no less critical that year, warningparliament that the government had not made clear why the “gas roundabout” was the best strategy to secure affordable and clearn energy to the Netherlands long term. Few lawmakers noticed.
Cyril Widdershoven, who consulted on Dutch energy policy at Deloitte and later TNO, a research agency, told me he was pushed out for sounding the alarm: “We were not allowed to voice any criticism.”
Russia had always honored its contracts with Western Europe (Eastern European countries weren’t so lucky), but Widdershoven realized the Netherlands wasn’t signing enough contracts to meet demand and relied on the spot market to make up the difference. That’s where prices rose tenfold last year.
René Peters, TNO’s director of gas technology, had the same concerns, but he felt they were ignored by the Ministry of Economic Affairs and belittled by the industry.
Jilles van den Beukel, a former geologist for Shell, agreed the Netherlands put too much faith in the market. “On that market,” he pointed out to me, “Gazprom is the dominant player.”
Funding Putin’s war machine
Sijbren de Jong, then an analyst at The Hague Centre for Strategic Studies, now an Eastern Europe specialist at NATO headquarters in Brussels, warned in the NRC newspaper that doing business with Gazprom meant doing business with Putin, and as a result the Netherlands would “indirectly fund the foreign policy of the Russian state.”
Gazprom contributes 5 percent to Russia’s GDP and supplies almost 40 percent of Europe’s gas. It is the single largest source of Putin’s income.
The Russian leader used the proceeds to modernize his armed forces. In 2007, he spent 10 percent of his budget on defense. By 2016 the share had reached 15 percent.
Shell nevertheless took a share in Nord Stream 2. Other Dutch companied signed contracts to build the pipeline.
With Russia to the end
When MH17 was shot down by a Russian missile over southeastern Ukraine, the official Dutch attitude changed. All meetings and visits were canceled.
But not for long.
Follow the Money, a Dutch website, revealed last year that Dutch civil servants returned to Moscow in 2017, three years after the crash. The Russian deputy minister for energy paid a reciprocal visit to The Hague in 2018, where he met with representatives of Gasunie and Shell.
That same year, Sergei Skripal and his daughter, Yulia, were poisoned in Salisbury. Dutch intelligence thwarted a Russian cyberattack on the Organization for the Prohibition of Chemical Weapons in The Hague.
The European Commission, finally acting on Eastern European concerns, proposed to apply its antitrust rules to Russia’s pipelines. Gazprom would no longer be allowed to simultaneously own and exploit pipelines. Putin angrily canceled South Stream. Kramer had left a year earlier.
Even then, the Russian leader could count on the Dutch and the Germans to defend Nord Stream 2. The Dutch government still insistedthat Russia was a reliable (and cheap) supplier of gas. It may have cut off gas supplies to Georgia in 2006 and 2008, Belarus in 2007 and 2019, and Ukraine in 2009 and 2014-15, but, ministers argued, “Each of these situations involved unique circumstances.”
The Dutch-German lobby to exempt Nord Stream 2 from EU competition law was half-successful. The rules would apply, but Germany, rather than the European Commission, had to work out the details with Gazprom. They never got the chance.
The Americans had lost patience. They imposed sanctions on Nord Stream 2 in 2019. Companies that helped build the pipeline would no longer be welcome in the United States. The Dutch-Swiss Allseas, which specializes in laying underwater pipes, left the project. Boskalis and Van Oord had finished dredging their trenches for the second Nord Stream just in time.
The Dutch government’s energy strategy for 2021-30, released in November of that year, contained no proposals to reduce Russian gas imports.