Pipeline to tighten Russian grip on energy

The Russian government approved plans on Monday for an oil pipeline that could enable the country to bypass Belarus and tighten Moscow’s grip over much of Europe’s energy supplies.

The proposal by Transneft, Russia’s oil pipeline monopoly, to build a new 1m barrel per day spur across Russian territory to a key Russian oil terminal in the Baltic port of Primorsk will boost the terminal’s capacity as a hub for supplies to Europe to 2.5m b/d.

Transneft said it expected the pipeline to be operational in 18 months.

Analysts have said the new spur could eventually end shipments through the Druzhba, or Friendship, pipeline via Belarus to Poland, Hungary, Slovakia, the Czech Republic and Germany. Russia has halted shipments through two other spurs of the Druzhba, to Lithuania’s Butinge terminal for the past 10 months and Latvia’s Ventspils terminal since 2003.

“Russian diplomacy is quite strong, quite experienced, and they are trying to divide us. That’s obvious,” said Gediminas Kirkilas, Lithuania’s prime minister, speaking at the Royal United Services Institute in London.

Despite the European Union’s ambitions to forge a common energy policy towards Russia, in practice bilateral energy deals had “the upper hand”, he added.

Transneft proposed the new oil pipeline spur after a dispute with Belarus last winter that led to disruptions of crude oil supplies to Europe.

Final approval from the Kremlin came just three days after Belarus signed an agreement to hand over a 50 per cent stake in its gas pipeline network, Beltransgaz, to Russia’s Gazprom, a key part of the settlement to the dispute between Minsk and Moscow.

The Beltransgaz deal, which was 13 years in the making, will increase Gazprom’s lock over gas networks to the west just one week after Russia, Turkmenistan and Kazakhstan agreed to expand shipments out of Central Asia via Russia in a blow to western governments’ efforts to build alternative pipelines bypassing Russia.

Gazprom signed a $2.5bn (€1.9bn, £1.3bn) agreement with the Belarus government on Friday for the 50 per cent stake. It is to pay Belarus $625m for a 12.5 percent stake in Beltransgaz in the next 20 days, while the remaining 37.5 per cent of the pipeline operator’s shares are to be transferred from 2008 to 2010.

“It is a big question: which is the centre of power [in Russia] – the Kremlin or Gazprom?” said Mr Kirkilas.

Warning of instability in the run-up to Russian parliamentary elections later this year, he added that he expected to see “a lot of people from Gazprom” in the Duma. “During the cold war, Russia was a more reliable partner than it is today,” he said.

Mr Kirkilas also pleaded with the EU for more time to phase out a Soviet-era nuclear power station in Lithuania to prevent his country from becoming more dependent on Russian energy supplies.

“We are concerned about the energy monopolisation in Russia, ranging from extraction and production to transport, sale, and transit,” he said, calling for the EU to consider gas and electricity interconnections between the Baltic states and western Europe as well as a liquefied gas terminal in the Baltic.

Mr Kirkilas also said that a planned gas pipeline under the Baltic sea that would directly link Russia and Germany would cost too much and could disturb chemical weapons on the sea bed.

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