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Putin, Schroeder give blessing to gas pipeline deal

September 8, 2005

By Louis Charbonneau

BERLIN, Sept 8 – The leaders of Russia and Germany gave
their blessing on Thursday to a gas pipeline deal that cements
Berlin’s energy ties to Moscow but which Poland and others fear
leaves them vulnerable to the whims of the Kremlin.

The deal on the pipeline, which will ship Siberian gas from
Russia to Germany, bypassing Poland and the Baltic states, was
signed by Russian state gas monopoly Gazprom, German utility
E.ON and Wintershall, a unit of German chemical maker

BASF.

Russian President Putin and German Chancellor Gerhard
Schroeder stressed the strategic importance of the project for
the further development of German-Russian relations in the
energy sector, the three firms said in a joint statement.

The deal, worth over 4 billion euros, was sealed in April
when Putin visited Schroeder in his home town of Hanover. It
was finalised by the two leaders on Thursday.

Gazprom will take a 51 percent stake in the partnership,
with the German companies each taking 24.5 percent.

Putin’s visit comes 10 days before a German election which
Schroeder is expected to lose to conservative candidate Angela
Merkel.

Merkel, who grew up in the former communist East and speaks
Russian well, has criticised Schroeder for sacrificing ties
with eastern European neighbours by getting close to Moscow.
She has promised a more even-handed approach.

With oil prices at record highs, energy policy has become a
key issue in Schroeder’s election campaign. On Wednesday,
Schroeder told the German parliament the Baltic pipeline would
help decrease Germany’s dependence on oil.

Schroeder sought to calm Polish fears over the pipeline,
which could at a later stage be opened to third parties.

“This is not against anyone, not against Poland or the
Baltic states,” he said.

PUTIN DEFENDS RUSSIA’S INTERESTS

Putin, too, tried to allay fears about the deal, which he
said was vital for Russia and Germany. He said Gazprom would be
unable to deliver an additional 60 billion cubic metres of gas
it has promised Germany and other west European states.

“It is impossible to transport this volume through the
existing network. We are not pushing anyone out of existing
business, but we are trying to avoid political, ecological,
climate and other risks and ultimately to bring down the price
of the product you buy from us,” Putin said.

“We reserve the right to defend our interests,” he said.

Despite Merkel’s vow to repair ties with the United States,
Poland and other smaller European countries, analysts say
Germany’s energy and economic needs will prevent her from
moving too far away from Putin.

Putin denied that his visit to Berlin was timed to give a
boost to Schroeder’s election campaign, pointing out that he
was planning to meet Merkel as well after the news conference.

“You know I’m also planning to meet Mrs Merkel. Why don’t
you think I support Mrs Merkel?” he said, smiling. The audience
of mostly journalists broke into laughter.

Designed in the early 1990s after the collapse of the
Soviet Union, the Baltic pipeline is meant to limit the
dependence of Gazprom, the world’s top gas producer, on
neighbouring states like Ukraine and Belarus for transporting
gas to Europe.

The 1,200-km (720-mile) line will run from Russia’s Baltic
Sea coast through international waters off Poland and the
Baltic States to make landfall at Greifswald on Germany’s
coast. It is scheduled to be commissioned in 2010.

Although Schroeder and Putin tried to dispel Poland’s
fears, gas industry experts say the Kremlin has been using
Gazprom as an economic weapon to put pressure on its ex-Soviet
neighbours.

Gazprom said on Wednesday it had told Georgia that it would
almost double gas prices amid strained relations between Moscow
and the former Soviet republic.

(Additional reporting by Mark Trevelyan)




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