Work begins on Baltic gas pipeline

by Valentinas Mite

Work began in the town of Babayevo, about 400 km inland from Vyborg, the Gulf of Finland port from where the pipeline is due to extend.
During an inauguration ceremony in Babayevo, Russian Prime Minister Mikhail Fradkov said the pipeline would increase the energy security of the participants.
"This [pipeline] will facilitate gas supplies significantly and will create conditions for making them more stable. Essentially it increases the energy security of the participant countries. Naturally, the fewer intermediate points and transit territories, the cheaper it is to meet the obligations that have been undertaken," Fradkov said.

The German side is also enthusiastic about the project.
German Economy and Technology Minister Michael Glos said: "I am happy that tomorrow [9 December] I will participate in the inaugural ceremony, the first welding of this natural gas pipeline, that in the future will make the supply of energy for our country and the European continent more secure."

Meanwhile, neighbouring Poland, Ukraine, and the Baltic States are suspicious and say the project might compromise their energy security. Gazprom owns 51 % of the pipeline venture, with Germany's E.ON and BASF both holding 24.5 % stakes. Gazprom currently exports gas to Western Europe through overland pipelines crossing Ukraine, Belarus, Poland, and Slovakia.
If Russian energy exports no longer cross these countries' territories, Moscow could be less inclined to sell them gas at below-market rates.

Analyst Jakub Boratynski of the Warsaw-based Stefan Batory Foundation says Poland is afraid the pipeline might damage the security balance, which exists in this part of Europe.
"Already now countries like Poland, the Baltic States, Slovakia are overly dependent on Russian supplies to a much larger degree than the Western European countries and that dependency was kind of offset by the fact that transit routes to Western Europe went through these countries in the region," Boratynski said.

Poland, Ukraine, and the Baltic States have also complained about being kept in the dark about the project.
Lithuanian Prime Minister Algirdas Brazauskas told earlier this month that "during the preparation of the project nobody asked our opinion even once. Everything was done behind our backs.... I don't know who is trying to play around with us, Russia, or maybe Germany."

There are also environmental concerns. Many of those worries are focused on the potential dangers of Baltic Sea mines left over from World War II.
During a visit to Warsaw, EU Energy Commissioner Andris Piebalgs attempted to allay some of these concerns, saying that the Russian and German companies involved had promised to conduct environmental studies before starting to build the pipeline. Germany's new Chancellor Angela Merkel also sought to defuse tensions, promising to create a working group to examine the project.

Russian President Vladimir Putin said in June that the pipeline would start operating in 2010 and would be able to deliver 27 bn cm of gas a year. The cost of construction has been estimated at EUR 4 bn ($ 4.7 mm).
Matthias Warnig, the head of Dresdner Bank's operations in Russia and an old-time acquaintance of President Putin, is tipped to get the job as the chief executive of the project. Former German Chancellor Gerhard Schroeder will head the shareholders' committee of the consortium behind the pipeline. Schroeder was still in power when the gas deal was forged in September.