Putin Secures New Gas Pipeline, Undermining U.S. Plan
http://www.bloomberg.com/apps/news?p...bFA&refer=home
By Lucian Kim
Dec. 20 (Bloomberg) -- Russian President Vladimir Putin secured a deal to start building a natural-gas pipeline to Central Asia, undermining a U.S.-backed plan to give the region an alternative route bypassing Russia.
The agreement to construct the new pipeline from Turkmenistan and Kazakhstan was signed at a Kremlin ceremony broadcast on Russian state television today.
"The creation of this new energy artery allows for long- term, large-scale gas deliveries to our partners and is a serious contribution by our countries to energy security in Europe,'' Putin said after officials from the three former Soviet republics signed the accord.
Putin reached a preliminary agreement to build the so- called Caspian pipeline, capable of raising Russian imports of Central Asian gas by 40 percent, in May. A follow-up deal to start construction was delayed after Turkmenistan and Kazakhstan considered a U.S. plan to build a link below the Caspian Sea, giving them a new route that would break OAO Gazprom's monopoly on their gas exports to Europe.
The new pipeline, with an annual capacity of 20 billion cubic meters of gas, will open no later than the end of 2010, Russian Energy Minister Viktor Khristenko said on state television after the ceremony.
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"This is very positive for Russia and Gazprom because for the foreseeable future they'll continue control of gas exports out of Central Asia,'' said Steven Dashevsky, co-head of equities at Moscow-based UniCredit Aton. "It's a clear setback for the West because there are still no alternative routes for Central Asian gas.''
The U.S. doesn't consider today's agreement a setback, because the pipeline will help Turkmenistan meet existing contractual obligations to Russia, said a State Department official who declined to be identified. A trans-Caspian link will still be viable once new fields are developed if market forces determine export routes, the official said.
Gazprom, which supplies a quarter of Europe's gas, is looking to increase that share as it plans two additional export pipelines to the European Union. Even though it holds the world's largest reserves of gas, Gazprom depends on imports from Central Asia to compensate for declining production at its largest Siberian fields.
The European Union and U.S. have sent government and business delegations to Turkmenistan since the February election of President Gurbanguly Berdymukhammedov, who is opening the country to foreign investment after 15 years of isolation. The country, squeezed between Kazakhstan and Iran, is the second- largest gas producer in the former Soviet Union.
The West has pushed a plan to build a sub-sea link to Turkmenistan that would bypass Russia by plugging into a "southern corridor'' of pipelines to Europe via Turkey.
"Europe now knows it's not going to get the energy it needs from any place other than Russia,'' said Chris Weafer, chief strategist at Moscow-based UralSib Financial Corp. "The new Caspian pipeline opens the way for a greater level of pragmatism in EU-Russia relations after Putin leaves office next year.''
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