The $5.7 billion pipeline is a joint project between Russia’s state-owned energy giant Gazprom and several German companies. It will run under the Baltic Sea from Vyborg, north of Russia’s St. Petersburg, to Greifswald, on the northeastern coast of Germany.
Eric Kraus, a chief strategist at Sovlink Securities, a brokerage firm based in Moscow, sees the deal as a vital project marking a deepening of Russian-German economic ties. The pipeline, he said, will also generate major profits for both countries.
“This is important for Germany first of all from the energy security standpoint, secondly because Putin and Mr. Schroeder have very close personal relations and German companies are very much involved in the Russian economy and will be involved in these projects," Kraus said. "So it’s very much a win-win proposition for both countries.”
Schroeder on 7 September described the pipeline as a "groundbreaking step" toward reducing Germany's reliance on oil.
For Russia, the new pipeline paves the way for a significant increase in gas exports. It will also enable Gazprom to stop paying transit fees to Poland and Ukraine. Russia has been eager for its energy exports to bypass these two countries, which have increasingly troubled relations with Moscow.
Kraus said the Baltic Sea pipeline offers a more reliable route for Russia to pump its gas to Western European’s lucrative markets.
“Russia does not want to have her oil and gas exports threatened by some of the transit countries, in particular Poland," Kraus said. "This will increase the volume of Russian gas exports to Europe and will to some extent increase the security of those exports.”
The project has come under fire in Eastern Europe, which also relies heavily on Russian gas. Polish President Aleksander Kwasniewski on 7 September slammed Berlin and Moscow for putting their own interests first and failing to consult Germany’s EU partner countries about the deal.
Schroeder, however, sought to soothe Poland by describing the pipeline as "a project on a European dimension" that other countries can join.
Observers say the timing of the signing ceremony, just 10 days before Germany's parliamentary elections, testifies to the importance of the deal for Moscow.
The signing was originally planned for October, but with Schroeder -- Putin’s close ally -- trailing in the polls, it was moved forward to 8 September.
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