TALLINN - Nord Stream, a 7.4 billion euro pipeline that would pump natural gas from Russia to Germany and bypass Ukraine, cleared its last major regulatory hurdle on Nov. 5 when Sweden and Finland both gave the go-ahead to a project that could redraw Europe's energy map, reports The Wall Street Journal. The two countries' governments said they had granted consent for the pipeline to pass through their exclusive economic zones in the Baltic sea.
Denmark approved the project on Oct. 22. This leaves only Russia and Germany to approve the project.
Once up and running, Nord Stream could mean the end of Ukraine's status as a major gas-transit country. The European Union currently gets 80 percent of its Russian natural-gas supplies via Ukraine, but the long-term viability of the route has been called into question, especially after a pricing dispute between Moscow and Kiev last January led to the cutoff of Russian gas to hundreds of thousands of Europeans in the middle of winter.
The Swedish government, despite its acquiescence, has said that the Baltic sea environment is a 'prioritized area' and is demanding that Nord Stream specify any consequences the project might have on the seabed, reports news agency LETA. "The government has set high demands to ensure that the sensitive environment in the Baltic sea is not threatened," said Sweden's Environment Minister Andreas Carlgren.
"We have thus concluded that a 'yes' is the only available decision. The government is satisfied that the planned route is in accordance with Swedish responsibilities to protect and preserve the marine environment," Carlgren said.
The pipeline will link the Russian city of Vyborg with Greifswald in Germany, running a distance of 1,220 kilometers under the Baltic sea, passing through Russian, Finnish, Swedish, Danish and German waters while bypassing the Baltic states and Poland.
The project is led by Russian state-run energy giant Gazprom, with a 51 percent stake, in partnership with Germany's E.On Ruhrgas and BASF-Wintershall, each with a 20 percent stake, and Dutch Nederlandse Gasunie with 9 percent.
Construction of the first of two parallel pipelines will start next year, the first to be operational in 2011, with the second coming on-line a year later.
In 2005, the project was dubbed the 'Schroeder-Putin' pipeline, after the controversial deal between the then German chancellor and Russian president was announced weeks before the German general elections. Schroeder lost the elections but pocketed a well-paid job with Gazprom as chairman of the Nord Stream consortium.
Denmark's motivation was to secure, through its energy company Dong, a supply contract with Gazprom Export, totaling two billion cubic meters of gas per year to be delivered by the pipeline starting 2011.
At full capacity, Nord Stream will have two parallel steel pipelines delivering 55 billion cubic meters of gas yearly.
Russia has for years been looking to reduce its dependence on Ukraine and come up with alternative export routes. Some analysts have questioned whether the huge investments required to build this infrastructure will pay off, amid growing doubts about the long-term demand for gas. The projects were conceived at a time when the EU was forecasting big increases in its demand for the clean-burning fuel and worrying about its energy security.
In recent months, however, an increasing oversupply of gas and predictions that climate-change policies to limit carbon-dioxide emissions could dampen demand for all fossil fuels, including gas, has led many to scale back their forecasts. "Nord Stream will be operational by 2012, a time when Europe won't need the additional gas because of the supply glut," says the head of East European Gas Analysis, Mikhail Korchemkin.
Nord Stream disputes this, saying that by 2025, as domestic production declines, 81 percent of the gas the EU consumes will be imported, compared with 58 percent in 2005. The EU will have to import nearly 200 billion cubic meters of gas a year more than it does now, says the pipeline consortium.
Besides questions on future demand, the project had to deal with numerous objections from Baltic sea nations which feared the possible negative impact that construction of the pipeline might have on local fisheries, shipping traffic and the marine environment.
There is also WWII-era unexploded ordnance still littered throughout the Baltic seabed, along the pipelines' route, say environmentalists. The group has to clear around 50 unexploded munitions lying on its planned route, mostly in Finnish and Russian waters. Chemical weapons found in the vicinity of the Danish island of Bornholm will not be removed, as the Danish authorities say it would be better to leave them where they are.
Estonia is against the project. The Estonian parliament, the Riigikogu, on Oct. 27 voted on a resolution calling on the states concerned not to issue environmental permits, since "not all the risks that the project poses have been sufficiently taken into account." The Riigikogu considers it important for parliaments of states around the Baltic sea to discuss the project at public forums and proposed to organize a conference to discuss the gas pipeline and its effects, before work begins.
Based on the UN's so-called Espoo convention regarding trans-border environmental impact, Estonia has a consultative say in the approval of the project, though it cannot directly veto it.
The shallow, dying Baltic Sea and especially the Gulf of Finland, pose particular environmental challenges to the developers. In order to have as little environmental impact as possible, Nord Stream says it will not use conventional construction methods such as digging trenches or cutting rocks to even out the seabed, but instead use gravel to fill up holes and simply go around massive rocks on the bottom. Construction will be allowed only during limited times, taking into account migratory bird and fish mating seasons.
EU representative for Nord Stream Sebastian Sass says that construction of the project "is only going to work if it fully complies with EU standards. If you look at the Finnish or Swedish legislation, it tells you exactly what the procedure is."
The Baltic states and Poland have raised the issue of energy security, claiming that the project's sole aim is to circumvent them. Their fear is that once Germany has a direct link to Russia, Moscow will find it much easier to cut off supplies to Warsaw or Tallinn, without affecting western European consumers.
The project would for the first time directly link Russia's giant gas fields in Siberia to the country's largest European customer, Germany, with a capacity of 55 billion cubic meters a year.
The joint venture partners will pay 30 percent of the total price tag themselves, with the rest coming from banks. The project has already received bids from banks to provide the first tranche of 3.9 billion euros in funding.