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Russia: Moscow Suffers Setback In Pipeline Plan To Bypass Ukraine

Russia's plan to build a bypass pipeline around Ukraine suffered a blow this week following an agreement by Poland to buy gas from Norway. The deal is likely to make Warsaw more resistant to Moscow's strategy and could spur Russia's attempts to mend fences with Kyiv. RFE/RL correspondent Michael Lelyveld reports.

Boston, 31 August 2001 (RFE/RL) -- A deal reached on 29 August by Poland and Norway could spell the end of Russia's long campaign to pressure Ukraine over its pipelines that transport Russian gas.

The British "Financial Times" reported that Norway's agreement to sell 74 billion cubic meters of gas to Poland over a 16-year period will reduce Warsaw's dependence on Russia for fuel supplies.

The deliveries by Norway's Statoil to the Polish Oil and Gas Company, known as PGNiG, would start in 2008 and rise quickly to 5 billion cubic meters annually through 2024. Although the amount seems relatively small, Poland consumed only about 11 billion cubic meters of gas last year. Over 60 percent of that was imported from Russia.

The deal is important because of the three-way tensions that have been building among Russia, Poland, and Ukraine over Kyiv's use of Russian gas and Moscow's attempts to solve the problem.

Some 90 percent of Russia's gas exports to Europe run through the former Soviet pipelines in Ukraine. But Russia has frequently charged Ukraine with illicitly tapping the gas. Ukraine also owes an estimated $1.3 billion for past Russian supplies.

In July of last year, Russia announced it would try to build a bypass line through Poland and Slovakia to reduce its reliance on Ukraine and eventually double energy exports to the European Union.

But getting Poland's consent has been problematic. Although Warsaw has sent mixed signals, it had ultimately been unwilling to take part in a plan that would undercut Ukraine.

The agreement with Norway, which has been debated for months, may help Poland in at least two ways. It limits Moscow's power to pressure Warsaw over its stand on the bypass by ending its role as monopoly supplier. It may also satisfy an EU directive on diversifying energy sources, which may aid Poland's drive to join the EU.

On the downside, Poland will pay more for Norwegian gas, which will require a new pipeline to be built across the Baltic Sea. Poland's neighbor Germany may also be displeased, since Germany's Ruhrgas is a shareholder in Russia's Gazprom and a partner in studying the bypass plan.

While the results may be mixed, the effects of the pending deal have been notable in recent weeks.

After more than a year of friction, Russia and Ukraine are close to an agreement on rescheduling Kyiv's gas debts on terms that could give it as much as a decade to pay.

Upon taking office in May, Ukrainian Prime Minister Anatoliy Kinakh took a tougher position than his predecessor Viktor Yushchenko by insisting that Kyiv would convert the arrears of its power sector into sovereign debt. Ukraine has also fought off Russian proposals to control the transit lines.

A compromise may be found, but it also seems likely that Ukraine's harder line has been the result of a sense that Russia's bypass plan would fail.

At a meeting to mark Ukraine's 10th anniversary of independence, Russian President Vladimir Putin again raised the pipeline issue with Polish President Alexander Kwasniewski, according to the Reuters news agency. But there were no reports that Kwasniewski agreed to the bypass plan.

Putin now appears to be continuing his efforts, but in a much less aggressive fashion.

On 2 September, the Russian president will pay a short visit to Finland, where Moscow's plan for yet another bypass line is on the agenda, according to the French news agency AFP.

The news agency quoted Matti Alttonen, head of the Russia department at Finland's Foreign Ministry, as saying, "Many of these items are very long-range."

Russia's Gazprom had previously threatened that it might build a pipeline through Finland and under the sea to Germany, skipping Poland if Warsaw did not agree to bypass Ukraine.

Putin has been directly involved in decisions to build other detour routes for Russian exports, such as the oil line around Chechnya through Dagestan, and the Baltic Pipeline System, which reduces Russia's reliance on Latvian and Lithuanian ports.

But some of the fire may have gone out of Putin's strategy for the detour around Ukraine. Russia's gas exports to Western Europe dropped by over 5 percent in the first half of this year from the year-earlier period, according to Gazprom figures reported by Interfax.

Deliveries to Germany plunged over 9 percent, relieving some of the push for costly new lines. Slower growth in Europe and lagging investment in Russian gas fields both seem to blame.

Putin's plans now look more like a long-term strategy than a near-term threat to Ukraine. In the meantime, Moscow appears ready to settle its differences with Kyiv.