Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Gazprom to Build Big Baltic Pipeline

Gazprom said Monday that its board has given the go-ahead for a huge pipeline project from Russia to Western Europe under the Baltic Sea, now seen operational by 2007.

The project has long been considered Gazprom's trump card in its talks with Ukraine, Belarus and Poland, allowing the world's largest gas firm to agree on better transit terms via existing routes.

Analysts, long skeptical of the costly project, said Monday that Gazprom now seemed committed to turning it into a real link from a decade of paperwork as it faced increasing problems in Belarus and unsolved disputes with Ukraine and Poland.

"The pre-investment period is over. Gazprom has decided today to start implementing the North European gas pipeline project," Gazprom chief Alexei Miller said in a statement. "The project will link directly Russian and European gas transport networks. Talks will be held in the near future with all interested parties to coordinate efforts."

The Baltic line was initially designed to ship up to 30 billion cubic meters of gas yearly from western Siberia to Finland and then under the Baltic to Germany.

Gazprom said Monday that the link could also supply Sweden, Denmark and Britain.

"Given Gazprom's increasing problems in Belarus and old difficulties with Ukraine and Poland, it is becoming apparent that Gazprom now wants to avoid enhancing existing export routes to supply more gas to Western Europe," said Sergei Glazer of Alfa Securities in London.

Gazprom supplies about one-quarter of Europe's gas imports, or 130 billion cubic meters a year, mainly via a pipeline that crosses Ukraine.

Gazprom has repeatedly accused Ukraine of stealing gas and Kiev owns the company about $2 billion. Gazprom hoped for relief after it built an alternative pipeline in 1999, the Yamal-Europe link from Russia to Germany via Belarus and Poland.

It planned to dramatically boost capacity by 2005 but failed to agree with Poland on a series of issues last year.

This year, Gazprom became embroiled in a spat with Belarus over gas supplies after Moscow became more lukewarm in its support for Belarussian President Alexander Lukashenko.

"The Belarus problem is clearly pushing Gazprom ahead with the Baltic plan, which is in theory supported by the European Union," said Valery Nesterov of Troika Dialog.

Glazer added that from a technical standpoint the Baltic pipeline was not very difficult to build as Gazprom had already learned important deep-water expertise in the past two years building a pipeline under the Black Sea to Turkey.

Nesterov, however, described as too optimistic a deadline to build the link by 2007, saying Gazprom would first need to find powerful Western partners and make sure Europe really needed additional gas volumes by that time.