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Putin built a pipeline into German politics

March 6, 2023

Natural gas has stopped flowing from Russia to Germany. But many questions remain on how much influence the Kremlin had on Berlin through the Nord Stream pipeline.

Manuela Schwesig during a visit to the Nord Stream 2 terminal in Lubmin in 2020
SPD Premier Manuela Schwesig has come under attack over her support for the Nord Stream projectImage: Jens Büttner/dpa/picture alliance

It seems like a scene from a crime movie, but it happened in northeastern Germany in the spring of 2022: A tax official found tax documents relating to a gift of €20 million ($21 million) from Russia to a German climate foundation. The documents had been urgently sought in her office, but no one could find them. Instead of handing them in, the official took the files home and burned them in her fireplace.

What went up in flames were documents from the Climate and Environmental Protection Foundation on the Baltic Sea, the endpoint of two Russian gas pipelines, Nord Stream 1 and 2, which would be damaged by explosions in the fall of 2022.

The climate foundation was established at the request of Mecklenburg-Western Pomerania State Premier Manuela Schwesig, of the Social Democrats (SPD), in early 2021. The non-profit foundation then went on to set up a business operation that was to "contribute to the completion of the pipeline" — while the United States was threatening Germany with sanctions should Nord Stream 2 be completed.

"This foundation had a cover mission," Mario Czaja, secretary general of the opposition center-right Christian Democrats (CDU), recently told the federal parliament, the Bundestag. "Instead of focusing on climate protection, the foundation was aiming to bring Nord Stream 2 online at all costs, circumvent possible sanctions and pave the way for business for the Russian state-owned company."

What Czaja says is undisputed. His CDU was in a coalition government with the SPD in Mecklenburg-Western Pomerania at the time and also supported starting the foundation in a vote in the state parliament. Today, the CDU now admits this was a mistake.

Map showing the course of the pipelines in the Baltic Sea
Nord Stream 1 and planned Nord Stream 2 went directly from Russia to Germany

Protecting the climate? Or the pipeline?

The foundation then got involved in the actual construction of the pipeline, placing orders and paying contractors. It also bought the "Blue Ship," which was used to attach the pipeline's pipes to the Baltic Sea floor.

On top of that, the foundation also bought shares in a shipbroker, tools, and vehicles such as wheel loaders and machinery. Some 80 companies stopped working for Nord Stream but carried on as subcontractors of the foundation. The order volume totaled €165 million.

"The foundation had no other purpose than to act as a general contractor for the Kremlin, as Putin's long arm, and to pave the way for business for the Russian state-owned corporation," Czaja told the Bundestag. For this reason alone, he said, Gazprom made a donation of €20 million to the foundation.

The CDU's criticism is shared by the neoliberal Free Democrats (FDP), the smallest party in Olaf Scholz's federal coalition government.

A central question is "what expectations the Kremlin" had associated with the payment, said Hagen Reinhold, an FDP Bundestag member from Mecklenburg-Western Pomerania. "Who seriously believes that €20 million were transferred from Gazprom to this foundation to create seagrass meadows in the Baltic Sea? No one believes that!"

Matthias Warnig in 2018 in front of the Nord Stream logo
Warnig, managing director of Nord Stream 2 Germany, is said to have close ties to SchwesigImage: Nord Stream Ag/Zumapress/picture alliance

Schwesig under pressure

Schwesig said the money was only ever intended for the foundation's nonprofit work, i.e., climate and environmental protection. However, this was never put in writing.

She said it was an agreement made in private with the head of Nord Stream 2, Matthias Warnig, who was acting on behalf of Russia.

Warnig is a colorful figure. A former Stasi secret service agent in the communist German Democratic Republic (GDR), he has been a close confidant of Russian President Vladimir Putin for decades. The two are believed to know each other from Putin's time as a KGB officer in Dresden. After the end of communist East Germany, Warnig became one of the most influential German managers in Russia and sat on numerous supervisory boards of German-Russian companies and banks.

Schwesig was trying to get Nord Stream 2 up and running until Russia invaded Ukraine. Why did she hold on to the project so vehemently, even though the German federal government had long since backed away from the pipeline, her political opponents ask?

The state premier has a degree in finance and, before her political career, worked for 12 years as an official for the tax investigation department and later in the Finance Ministry. She, therefore, had to know that the €20 million would only remain tax-free only if the charitable status had been fixed in writing.

Without this stipulation, the donation would be taxable as a gift, because the money could have been spent for the foundation's other purposes, including for the pipeline.

Was this what Schwesig and Warnig intended? That would mean that money from Russia would have flowed into the state coffers.

A parliamentary investigative committee in Mecklenburg-Western Pomerania has been trying to clarify this question since June but is not making much progress. One reason is that many of the files are only to the members of parliament in largely redacted form, which the CDU's Mario Czaja has described as "trickery, deception, and cover-up."

Schwesig moved quickly to put an end to the Climate Foundation after Russia invaded Ukraine. In March 2022, she announced that the organization would be dissolved, and its capital used for humanitarian assistance in Ukraine. But to date, this has not happened, partly because the foundation's board is bitterly opposed to the dissolution and is also appealing against the tax assessment requiring payment of €9.8 million in tax.

Subpoena increasingly likely

This brings us back to the tax office, where the foundation's tax return remained unprocessed for months and, in the end, could not be found. As it turned out, it had been misfiled. When the tax officer responsible for it found it again by chance, she feared personal consequences, panicked, and burned the documents. The 26-year-old later confessed to investigators. The public prosecutor's office was called in, and disciplinary proceedings are underway against the officer.

Schwesig said she learned of the burned file only recently from the media. "I don't believe that," responded Mario Czaja. "A head of government who keeps pretty much everyone in her sphere of influence on a short leash in order to have everything under control is supposed to have known nothing about all this, is supposed not to have been informed about this process by her finance minister, by her justice minister?"

She rejects this criticism. "A state premier does not interfere in fiscal and prosecutorial matters, and that is none of her business," the Social Democrat countered on public broadcaster ARD. But she did not answer the question as to whether she would also testify under oath.

Schwesig may yet have to do exactly that before the parliamentary investigative committee. A subpoena is becoming increasingly likely. Schwesig can't escape the past.

This article was originally written in German.

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