Gazprom increases pressure on Ukraine in gas pipeline strategy

Russia's Gazprom has increased pressure on Ukraine with an announcement that it is starting a study for a gas pipeline to Europe across the Baltic Sea. The move to bypass Ukraine is the second such step in the past two weeks. On 24 April, the Russian gas monopoly signed an agreement with the Ruhrgas and Wintershall companies of Germany and Finland's Fortum to study the $ 3 bn undersea route.
Gazprom board member Yuriy Komarov said, "Besides the feasibility study, the sides will work out a joint business plan and a financing concept." The news follows a similar Gazprom announcement on 16 April of a study by European gas companies from Germany, France, and Italy, as well as Poland's state-owned PGNiG. The plan calls for analysing three pipeline routes running through Poland and Slovakia, avoiding Ukrainian territory.

The studies are part of the Gazprom strategy that began last July to develop detours around Ukraine. Moscow has been locked in a long struggle with Kyiv over its diversions of gasfor the past seven years. Gazprom has been virtually helpless to stop the practice because 90 % of its exports to Europe are piped through Ukraine. The country has run up $ 2 bn in debts for Russian gas.
But the issue has now spread to include more than a dozen countries because of the European Union's plan to double its energy imports from Russia over the next 20 years. That proposal last October spurred new efforts on the pipeline routes by Gazprom's biggest customers and partners in the EU.
At the same time, Ukraine's debt and the threat of a bypass set off a chain of events that have contributed to the current government crisis. Under pressure from Russia for payments, Ukraine's former Deputy Prime Minister Yulia Tymoshenko tried to reform the country's energy sector to increase collections. Tymoshenko has charged that her efforts led to her firing and arrest on unproven charges of fraud.

The ripples from Gazprom's pressure may continue to be felt. The giant company, which is 38 % owned by the Russian government, has long coveted Ukraine's transit lines. But a series of schemes to swap Kyiv's debt for an interest in the gas network have apparently failed because of sovereignty concerns.
The EU has also been slow to make any connection between the bypass deals and political concerns about Gazprom. But that situation could change. A group of German lawmakers urged Ruhrgas to demand that Gazprom stop its assault on the media holdings of financier Vladimir Gusinsky. Ruhrgas owns 5 % of Gazprom.
But Gazprom appears to be following a relentless strategy with Ukraine by pursuing a series of plans in Poland. Warsaw initially resisted Gazprom's appeal for a route on the grounds that it did not want to help isolate Ukraine.
Poland relented, in part because of concerns that it might be seen as harming EU interests at a time when it is seeking membership. Some officials also argued that a refusal would only encourage Gazprom to develop the Baltic Sea route.
Warsaw has also had environmental reasons for resisting Gazprom. The company's preferred route runs through a Polish nature preserve which includes some of the last virgin forests in Europe. Gazprom has countered the concern by proposing two additional routes.
But the announcement of the second study for the Baltic Sea pipeline suggests that Gazprom is ready to pressure Poland with an alternative, in the same way that it is pressuring Ukraine by proposing Polish routes. Bypass pipelines have become one of the hallmarks of Russian President Vladimir Putin's government.

Putin ordered construction of a Caspian oil pipeline to avoid Chechnya after taking office as prime minister in 1999. Russia also started building an oil pipeline to detour around Ukraine this year. Moscow hopes to complete a Baltic oil line to the Gulf of Finland this year, bypassing Latvia and Lithuania.
Critics have said that a Baltic gas line to Germany would be far more costly than an overland route. But the project is similar in concept to Russia's Blue Stream pipeline to Turkey, which is due to be laid across the Black Sea this year. The controversial line would give Russia a direct route to Turkey without relying on transit countries.