Nord Stream Is The Big News In Europe Today

The Western press front pages were replete with Italian Prime Minister Berlusconi looking heavenward as he contemplated his announced resignation. Or was he thinking about AC Milan's recent run of form in Serie A?  There was nothing new in today's tedious play-acting in Greece and Italy. 

The news of fundamental economic importance was the opening of phase I of the Nord Stream underwater gas pipeline which links Russia's vast Siberian gas reserves with Germany.  The 1,200 km long pipeline can carry 27.5 bcm of gas, and when phase II is completed in 2012, Nord Stream can supply about 10% of the European Union's energy needs with the relatively green, fuel of choice for residential and industrial consumers. 

This is a sharp stick in the eye for Ukraine, Belarus and Poland, which had earned revenue from gas transmitted by older, overland pipelines through their territories.  Ukraine's efforts at disrupting supply in the past for political reasons are now neutralized.  Russia may eventually have from 25-33% of the EU's gas market supplied from its reserves.  As Russian President Medvedev said with some understatement, "We are going to put into operation the first stage of a new partnership with Russia and the European Union."  Gazprom OAO will own 51% of the Nord Stream venture.

We've always said that Russia's proclivities were naturally towards a stronger partnership with Europe than towards a wary partnership with America.  This massive technical and financial undertaking is a good start.  Relationships have been quietly building in other areas too, like football.  Gazprom has been a prominent uniform sponsor for Schalke 04 a great Bundesliga club with a rabid fan following. 

One curious item to note about the ribbon cutting for Nord Stream was that Chancellor Merkel was joined by the French Prime Minister Fillon and not by her erstwhile political companion of recent months, French President Sarcozy.  Germany has in principle gained access to more secure natural gas supplies through the Nord Stream joint venture, which strenghtens its economic prospects for the future, given the growing convergence of interests with Russia.