Estonia Holds Up Gazprom-Backed Pipeline to Germany (Update2)
Ott Ummelas and Lucian Kim
September 20, 2007

Sept. 20 (Bloomberg) — Estonia rejected a request by an OAO Gazprom-backed pipeline project to survey the seabed off its coast, threatening to delay plans to ship Russian gas directly to Germany.

Prime Minister Andrus Ansip’s government rejected the request by Nord Stream AG based on Estonia’s “sovereignty” and “national interests,” the Estonian government said in an e- mailed statement today. Russian Foreign Minister Sergei Lavrov vowed the project would be completed anyway.

The 1,200-kilometer (720-mile) pipeline, overseen by former German Chancellor Gerhard Schroeder, would run across the Baltic seabed, which is littered with World War II-era munitions. Poland and the three Baltic countries –Estonia, Latvia and Lithuania — oppose it, citing environmental concerns. Denmark, Finland and Sweden have voiced similar concerns.

“Our main position has always been that this pipeline in the Baltic Sea is not advisable at all,” Estonian Foreign Minister Urmas Paet said on Estonian public television today. “There have never been any disagreements about that. We will not allow the building of this pipeline in our economic zone.”

Nord Stream requested permission to survey the seabed after Finland proposed moving the pipeline route southward into Estonia’s economic zone.

`Active Dialogue’

“The permit is necessary for the survey, and the survey is necessary to see if this route is better environmentally,” Nord Stream spokeswoman Irina Vasilyeva said by phone from Moscow.

“We’re in a very active dialog with all the countries involved and are sure we’ll be able to convince all the skeptics,” she said.

Finnish Prime Minister Matti Vanhanen said on a visit to Estonia last week that Finland would allow the pipeline to pass through its economic zone if Estonia rejects the proposed route. The two countries define their territorial waters as extending 9 nautical miles from their coastlines. Beyond that, each claims a 3-nautical-mile economic zone.

“I’m sure the Nord Stream pipeline will go ahead,” Lavrov said in an interview broadcast on state broadcaster Vesti-24. He said Estonia’s decision should be “guided not by ideology but by rational consideration.”

Moscow-based Gazprom plans to start construction next year. Nord Stream, which will have a capacity of 55 billion cubic meters of gas a year by 2013, is key to Gazprom’s strategy of increasing deliveries to Europe, which already gets a quarter of its gas from Russia.

The pipeline may cost 9 billion euros ($12 billion) to build, E.ON AG said in May. State-controlled Gazprom owns 51 percent of the project. Germany’s E.ON and BASF AG split the rest.

Last Updated: September 20, 2007 11:25 EDT