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Gas pipeline from Russia to Germany reveals weakness in Putin's 'energy weapon'

Many people believe that the opening this week of the Nord Stream gas pipeline linking Russia and Germany will put Europe in an even greater energy bind with Russia. But Gazprom, the giant state-run company behind Putin's export-energy policy, has many weaknesses.

By Lucian Kim / November 7, 2011


On Nov. 8, energy giant Gazprom plans to start deliveries through Nord Stream, the first natural-gas pipeline linking Russia directly to Germany. The 760-mile pipeline under the Baltic Sea is a personal victory for Prime Minister Vladimir Putin, who pushed through the project despite technical challenges and opposition from neighbors.

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The $12.1 billion pipeline has stoked fears in Europe over growing dependence on state-run Gazprom, which already provides around a quarter of the European Union’s gas. Critics maintain that Nord Stream will seal a dangerous alliance between Berlin and Moscow, reminiscent of the 1939 Molotov-Ribbentrop Pact between the Soviet Union and Nazi Germany.

Gazprom is the perfect bogeyman: oversized, greedy, and always lurking around the corner. Rather than fight its image as Putin’s “energy weapon,” the company relishes it. But the monster is illusory.

Record high energy prices have lent the company an aura of invincibility that masks financial and technological challenges ahead. In the end, Nord Stream may be the only link in a planned web of Gazprom pipelines that actually gets built.

The Soviet Union opened the first gas pipelines connecting western Europe to Siberia four decades ago, tapping a source of hard currency to prop up the communist command economy. When the Soviet Union broke apart 20 years ago, Russia lost control over the gas riches of Central Asia and export pipelines through Ukraine. Price disputes with Ukraine led to repeated supply disruptions to the EU over the past five years.

To repair this weakness, Mr. Putin, during his first two terms as Russia’s president, pushed Nord Stream as part of a double-pronged gas delivery system devised to bypass Ukraine. A second underwater pipeline called South Stream is planned to connect Russia to southern Europe via the Black Sea.

Putin has global ambitions. He opened a first subsea pipeline to Turkey in 2005. Gazprom wants to build overland pipelines to China and is considering a conduit through communist North Korea to consumers in the capitalist South. The Chinese project is stalled over price disagreements, while the Korean pipeline has no future as long as the two Koreas remain enemies.

Gazprom’s march to the seas mirrors Russia’s 400-year quest to gain access to the world’s oceans. Since the collapse of the Soviet Union, Russian foreign policy has lost its past missions to spread civilization and ideology, and today mainly consists of managing the country’s resource flows. When Gazprom CEO Alexei Miller isn’t jetting around the world, he’s receiving ambassadors and ministers in his Moscow office.

Not surprisingly, neo-imperial impulses guide Russia’s energy policy today. Gazprom already owns more than a third of shares in the national gas companies of the three Baltic states and holds at least 50 percent in the pipeline networks of Belarus and Armenia.

Only Ukraine has consistently warded off Gazprom’s advances on the pipelines that carry 80 percent of Russian gas exports to Europe. Ukrainian President Viktor Yanukovych, elected last year on expectations he would restore frayed relations with Russia, has proven to bargain as hard as his pro-western predecessor, Viktor Yushchenko.


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