NoD: Russia will eliminate intermediates in energy supply

Russia will expand its oil-and-gas transporting network to reduce its dependency of energy-transiting countries, President Putin said after his meeting with German Chanceller Angela Merkel. Conflict with Ukraine over price of gas in late 2005, and conflict with Belarus concerning gas and oil transition and gas prices in 2006, have put under threat the provision of secured energy sources from Russia to Europe. Russia will speed up in laying underwater pipes to Germany and pipelines to the Pacific ocean that will allow it to ship fuels directly to its consumers. Germany, which is also a Chairman in EU and G8 this year, confirmed that it is ready to support these projects to eliminate dangers related to renegotiation of supply terms with countries such as Belarus.

Further last week, Tranneft claimed it is ready to build an oil pipeline bypassing Belarus with an annual capacity of 50 million tonnes. The proposals were submitted to the government in early January, when Russia stropped transporting oil via Belarus. Last year, 78.8 million tonnes of oil was piped via Belarus to Europe, while another 20 million tonnes were supplied to Belarusian oil refineries. From Russia, oil passes to Belarus via the Unech station on the two countries' border. According to Transneft source, the company offers to build a northbound oil pipeline from Unech along the Belarusian border via Velikie Lugi and then to Primorsk. According to industry watchers, the project cost will be around $2-2.5b.

Why it is important: Russian expansion to foreign energy markets will not be contingent upon its closest neighbours. For the sake of its energy security, the EU is ready to leave Russia with larger lever upon Ukraine and Belarus.