Russia opening gas pipeline to Western Europe

September 6, 2011

With its gas business in decline, Russia on Tuesday began filling a new pipeline that goes directly under the Baltic Sea to Germany, bypassing Ukraine, Belarus and Poland.

Russia has long wanted to build a way around the transit countries that lie between it and Western Europe, because of the money they siphon off and because Moscow feels they take unfair advantage of their position. The new Nord Stream pipeline gives Russia a stronger hand against, for example, Ukraine — with which it is currently in one of its periodic pricing disputes. But Russia nonetheless faces bleaker prospects for business in Western Europe.

August was one of the worst months ever for Gazprom, the state-owned Russian gas company, which saw a drop in exports to Europe despite the turmoil in Libya, another gas producer. This pushed overall output down 8.2 percent.

Gazprom, until recently a powerful agent for Russia’s foreign policy because of its control over the European supply of gas, has seen its position slip as new technologies for extraction and shipping gas from elsewhere have undermined its pricing. Nord Stream, which will become operational in October, will at least cut transit fees.

When Prime Minister Vladimir Putin turned on the switch to begin filling the pipeline, he couldn’t resist a dig at Ukraine.

“As any transit country, it has the temptation to benefit from its transit position,” he said, according to the RIA Novosti news agency. “Now this exclusive right is disappearing. Our relations will become more civilized.”

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