A "pipeline" to nowhere…

Russia continues to develop its gas transport infra-structure in a westerly direction. Work has already begun on assessing the possible impact on the environment of the construction and operation of the third and fourth strings of "North Stream". In addition, plans to revive the "Yamal-Europe-2" export pipeline have been approved.

The construction of the first string of "Yamal-Europe" was begun in 1996. The total length of the gas pipeline is about 2,000 km and it runs through Belarus and Poland and into Germany. The planned capacity of this pipeline is 32.9bn cu m of natural gas annually. At the same time, the European Union has included this project among those priorities which have been put into effect within the context of the Trans-European Network project. The EU and Poland were very interested in its implementation and in the increase in supplies of Russian gas to European markets.

But the situation has now radically altered.

The "Yamal-Europe-2" pipeline, with a capacity of 25bn cu m annually, is also due to run across Belarus and Poland, but in the direction of countries such as Slovakia and Hungary. The first step towards its implementation was the signing on 5 April of a memorandum of mutual understanding between "Gaz-prom" and the Polish company "EuRoPol GAZ". But the Polish side gave a rather cool reaction to this project.

The Poles said that the signing of the agreement does not bind Poland to building a gas pipeline and that it had no intention of increasing deliveries of Russian gas. Clearly, Poland is very jealous of Russia's attempts to achieve a dominant position in the markets of Eastern Europe by developing its transport infrastructure. At the same time, it should be noted that 48% of "EuRoPol GAZ" belongs to "Gazprom": in other words, the Russian energy giant has virtually signed an agreement with itself, thereby hoping to simplify the process of the materialization of the project.

Less than 20 years after the implementation of the first string of the "Yamal-Europe" pipeline, the perception of this project has radically altered: Russia's intention to commence construction of the second string is now being vigorously opposed in Poland. The economic significance of the pipeline in the mid-1990s is now evidently being considered from the point of view of the possible political consequences and as a threat to that country's national security. Poland does not wish to increase its gas imports from Russia, which heightens its dependence on one source and like the other European countries it is reviewing the possibilities of diversifying its sources of gas imports.

One - if not the main - reason for the construction of the gas pipeline is Russia's intention to reduce its dependence on Ukraine for the transit of its gas to European markets. Incidentally, this was precisely the reason the Polish politicians gave when they said they would not accept decisions that threatened Ukraine's interests. Such "protection" for its geographical neighbour is very laudable, but it is clear that Poland opposes the "Yamal-Europe-2" project not for purely altruistic considerations. In this instance its interests, while they are not identical with Ukraine's, coincide vectorially, which enables it to make the appropriate statements, at the same time gaining Ukraine's support.

As far as Ukraine is concerned, in the not so distant past up to 80% of Russian gas exports were transported via that country's territory. This situation does not suit Russia because, especially at the time of the "Orange Revolution", that country tried to use the factor of gas transportation to put pressure on Russia and obtain political and economic dividends. It was because of the differences between them that supplies of natural gas to Ukraine and Europe ceased.

Paradoxically, Russia's desire to reduce its dependence on Ukraine is directly linked with that country's intention to use the "gas card" to implement its own political and economic interests in the European region. As a consequence, a way out of this situation for Russia was the diversification of transport corridors. It was with this in mind that the first two strings of the "North Stream" pipeline were built and the implementation of the "South Stream" project began.

"North Stream" is a trunk gas pipeline which runs along the bed of the Baltic Sea between Russia and Germany. Thus, Russia has received an outlet to the potentially very productive German market, leaving such transit "mediators" as Ukraine, Belarus and Poland at a loose end.

Should the "South Stream" project, which will run along the bed of the North Sea, be implemented Russia will receive an outlet to the markets of Bulgaria, Hungary, Austria, Greece, Serbia, Slovenia and Croatia. The overall throughput volume of this pipeline when construction is completed will be around 63bn cu m of gas annually.

There is no doubt that Russia's intention to build new pipelines is part of its geopolitical as well as commercial interests. Reducing dependence on Ukraine in the question of gas transportation to Europe is of great importance to Russia. However, a number of experts see Russia's desire as being by no means pragmatic. In their view, there is no need to build so many gas pipelines. The reason is a trite one: Europe would not be able to consume so much Russian gas that it could be exported via all the existing and planned pipelines. As Yuliya Voytovich, an analyst of the "Investkafe" agency, told "Nezavisi-maya Gazeta", "there are far more negatives in the latest project to increase transport capacities. For example, in 2012 'Gazprom' exported 203.22bn cu m of gas to Europe, whereas the throughput capacity of the gas transportation system of Ukraine alone is 246.4bn cu m".

By using just the infrastructure of Ukraine, Russia will not be able to exploit it to the full. In the event of the completion of the construction of the third and fourth strings of "North Stream" and "South Stream" and the implementation of the "Yamal-Europe-2" project, Russia's pipeline capacities in a European direction will be increased to 380bn cu m. There is a very high probability that these pipelines will never reach their full capacity. And even if Russia is able to ensure a sustainable yield of the required amount of gas, there will simply be nowhere to send it. After the financial crisis the consumption of natural gas in Europe was reduced. At the same time, the Europeans have no intention of acquiring such a volume of gas from one source, believing the diversification of sources is a priority.

An important role in achieving this objective was played by the "shale revolution" in the USA. After the US had made sure its domestic market had enough of its own gas, the need for the import of liquefied gas from the counties of Eastern Europe was reduced and the released volumes were directed towards the European markets. A number of European countries, including Poland, are also counting on extracting shale gas on their own territory, which may also thwart Russia's strategic plans.

Russia's intention to build gas pipelines bypassing Ukraine and to strengthen its positions in the European markets could meet with commercial unprofitability and economic risks. If that is the case geopolitical intentions and political decisions may give way to economic expedience. Otherwise, if all its transport pipelines are implemented they will not fulfil their direct functions and at best they will be instruments for an elastic policy of pumping gas from one market to another without expecting any economic dividends.