EU, Russia launch controversial Nord Stream gas pipeline

Russia’s President Dmitry Medvedev and German Chancellor Angela Merkel inaugurated the 1,200-km Nord Stream natural gas pipeline that will initially supply the European Union with 27.5 billion cu m/year of Siberian gas, and will later provide 10% of the bloc's annual gas needs.

Nord Stream transports gas from Vyborg, near St. Petersburg in northern Russia, under the Baltic to Lubmin. The new project, which bypasses an old pipeline network through Belarus and Ukraine, draws on 1 trillion cu m of gas in the Yuzhno-Russkoye gas field in Siberia.

The gas will flow to Europe through two pipelines, once the project comes to completion. The capacity of this first line, will double once the second line is completed sometime next year. About 800 km of the second line has been laid.

Merkel said the pipeline is a “strategic project that is exemplary for the cooperation between the European Union and Russia” and she stressed that both sides will benefit from the link: Europe by ensuring steady gas supply and Russia with direct access to its biggest market.

“We will be closely linked for decades,” said Merkel of the line that has bypassed the sometimes troublesome transit routes across Ukraine, Belarus, and Poland to establish a direct link between the Russian and western European gas networks.

Even now Ukraine is in a dispute with Russia over gas prices, reigniting fears that supplies to western Europe might be disrupted again as they were in 2006 and 2009.

Analysts Andrew Neff and Zoe Grainge of IHS Global Insight saw Gazprom as the main beneficiary of the new line.

“The formal inauguration of gas supplies to Europe via Nord Stream is a seminal event for Gazprom as the manifestation of its policy of improving the security and stability of its Russian gas exports via investments in the diversification of supply routes,” they said.

“Gazprom's redirection of gas volumes away from the Ukrainian transit system and into Nord Stream will reduce the Russian firm's dependence on Ukraine and improve the stability and security of its gas exports to Europe,” the analysts said.

Nord Stream’s opposition

Opposition to the new line has been voiced by the leaders of Ukraine, Belarus, and Poland, as well as by others in Europe who fear too close a dependency on Russia as a supplier of the bloc’s gas supplies.

“Nord Stream will boost security of supply but also increase dependency on Russia,” the conservative German daily Frankfurter Allgemeine Zeitung wrote this week.

“Supply is too important to rely on one supplier—the blend is what counts. The EU needs to promote supply projects which are not subject to Russian influence,” the paper said.

EU Energy Commissioner Guenther Oettinger, no champion of Russia, told the opening ceremony that the EU is working to secure natural gas supplies from other countries, including several in the Caspian region that could be linked to the EU by the planned Nabucco pipeline.

Last month, Oettinger underlined his concerns about Russia at the launch of the Trans-Adriatic Pipeline, saying that it was part of the EU’s Southern Corridor strategy, which aims to bypass Russia and establish a direct link for the transport of gas from Azerbaijan to the bloc.

“If for some reason Azerbaijani gas does not reach the western border of Turkey, TAP will need to transport Russian gas reaching Turkey via Blue Stream or via the Bulgarian transit pipeline,” he said.

“Don't get me wrong, this is not a bad thing,” Oettinger said. “But it would mean that TAP’s contribution to Europe's security of supply would be less than it could be.”

Meanwhile, Russia is working to construct the South Stream gas pipeline which is meant to transport Russian gas to Europe under the Black Sea beginning in 2015.

OAO Gazprom holds 51% of Nord Stream, E.On Ruhrgas AG and Wintershall AG each hold 15.5%, while Nederlandse Gasunie NV and GDF Suez hold 9% each.

Contact Eric Watkins at hippalus@yahoo.com.

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