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Last Updated: Thursday, 8 September 2005, 12:58 GMT 13:58 UK
Russia and Germany sign gas deal
Wyborg Griefswald map
The pipeline will link Russian port Wyborg to Germany's Greifswald
Germany and Russia have signed a pipeline agreement on Thursday that will bypass the current energy network and transport gas under the Baltic Sea.

Russian President Vladimir Putin and Chancellor Gerhard Schroeder finalised the deal, worth some $5bn (2.7bn).

Russia's Gazprom will own 51% of the pipeline, with Germany's EON and BASF taking 24.5% each.

The pipeline has not been without controversy, and Poland has complained it may compromise its own supplies.

The pipeline will link the Russian port of Wyborg and the town of Greifswald in north-eastern Germany, running underwater for almost 1,200 kilometres (744 miles).

Long-term stability

Russia is one of Western Europe's biggest suppliers of commodities and supplies a quarter of the region's gas needs.

The Baltic Sea pipeline is a European scale project that is not directed against anybody
Gerhard Schroeder

With limited natural resources of its own, Germany's dependency is even greater and Europe's biggest economy relies on Russia for a third of all its oil and gas imports.

Energy agreements are key to long-term development and Germany is keen to secure supplies as it tries to revitalise its sluggish economy.

Its existing pipeline is set to reach capacity and it needs to find other ways of meeting demand.

Russian President Vladimir Putin and German Chancellor Gerhard Schroeder
Germany is very dependent on Russian energy supplies

The importance of getting contracts right means that new deals often become hot political issues.

Press reports in Russia said that President Putin also was due to meet German opposition leader Angela Merkel.

Critics within the European Union have complained that Germany is guilty of putting its own interests above those of other member states.

'European scale project'

Poland joined the EU in May 2004 and has been calling on the other members of the trade bloc to adopt a common policy towards Russia.

Warsaw is worried that the new pipeline - which also would bypass EU members Lithuania, Latvia and Estonia - could be used to divert energy away from Poland for political purposes.

Mr Schroeder has tried to calm Poland's worries.

"There are no grounds for concern," Schroeder said. "The Baltic Sea pipeline is a European scale project that is not directed against anybody and that should be open to later participation by third parties."

See the plans for the pipeline

Go-ahead for Balkan oil pipeline
12 Apr 05 |  Business
Gazprom opens doors to foreigners
24 Jun 05 |  Business

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