Russia opens Baltic pipeline that skirts Ukraine

Russia opened what will be the biggest post-Soviet era natural gas pipeline to Europe on Tuesday, saying it would help reduce the risk of supply disruptions even though it threatens to aggravate political divisions on the continent. At a ceremony on Germany's Baltic shore, Russian President Dmitry Medvedev said the 7.3 billion euro ($10 billion) Nord Stream pipeline, which runs beneath the Baltic Sea, would boost gas supplies to Europe and strengthen bonds with its biggest energy customers.
But analysts have warned that the 1,224-km pipeline from western Siberia to Germany that bypasses traditional transit nations would divide the continent. Poland and Ukraine see it as an attack on their national interests. "Natural gas from Russia and the electricity produced from it will help provide steady energy supplies to consumers on the continent" and bolster its energy security, Medvedev said before joining German Chancellor Angela Merkel in opening a giant spigot to start the flow of gas in a ceremony broadcast on television.
"We hope that this co-operation will face no artificial barriers, despite a certain difference in approaches that have been discussed here, because there is no economically viable alternative to the co-operation (between the EU and Russia)." Merkel called it an exemplary example of co-operation between Russia and the European Union. To underscore that, she was joined by French Prime Minister Francois Fillon and Dutch Prime Minister Mark Rutte.
"This project shows that we can count on reliable and durable partnership with Russia for decades," she said. "We've got a fundamental interest on reliable energy supplies. This will equally benefit both the receiving countries and Russia." The pipeline - one of Europe's largest infrastructure projects and the world's longest underwater pipeline - will handle 27.5 billion cubic metres per year at first, and that will double to 55 billion cubic metres a year once a second adjacent pipeline is completed late next year.
That is the rough equivalent of combined German, French, Dutch and British consumption of Russian gas last year. "This pipeline reduces risks of supply disruptions caused by political disputes between Russia and transit countries like Belarus and Ukraine," said Carsten Fritsch, an analyst at Germany's Commerzbank.
The Nord Stream pipeline was once billed as a means to bring extra Russian gas to Europe, but the link's main purpose now is to lessen Moscow's reliance on Ukraine pipelines. It has stirred tensions between Germany and Poland for many years. In 2006 a Polish defence minister compared the Nord Stream project to the 1939 Molotov-Ribbentrop Pact in which Nazi Germany and the Soviet Union agreed to divide Poland.
"All the commotion has been calmed down now," said former Chancellor Gerhard Schroeder, when asked about the Nazi analogy. Schroeder is the supervisory board chairman of Nord Stream. "This project is not aimed against anyone," he told Phoenix TV. The Nord Stream pipeline was designed at a time when EU demand for gas and for imports from Russian gas export monopoly Gazprom were rising. Because gas demand in the EU has fallen since the beginning of the debt crisis, while liquefied natural gas (LNG) imports to western Europe have risen sharply, new supplies are no longer needed.
The vast bulk of the Russian gas - 25 bcm from Yuzhno-Russkoye, an upstream joint venture of Gazprom and Germany's Wintershall - will simply be rerouted to the new link from the transit pipelines via Ukraine. Ukraine's pipelines, which have brought 80 percent of Russian exports to Europe, have been vulnerable to disruption during repeated disputes between Kiev and Moscow over prices, which have led to flows being cut off in mid-winter.
The route under the Baltic is immune from such rows. For Russia, security of its links westward is vital as Gazprom relies heavily on European customers for revenue. In the European Union, Germany and its western neighbours stand to benefit most from the new route. Guenther Oettinger, EU energy commissioner and a former German state premier, dismissed suggestions the pipeline would make Europe more vulnerable to Russia. The new pipeline from Russia makes landfall in Lubmin, about 50 km west of Germany's Polish border.