Nuclear phaseout to hand Kremlin a win in Germany

Reuters News
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Posted: Jul 18, 2011 5:18 AM
Nuclear phaseout to hand Kremlin a win in Germany

By Alexei Anishchuk and Jessica Bachman

MOSCOW (Reuters) - Russian President Dmitry Medvedev goes to Germany to meet Chancellor Angela Merkel with a stronger hand than ever to win a long-held aim: closer access to consumers in the biggest market for Russian gas.

The host nation is Russia's third-largest trading partner and the biggest buyer of Russian gas, but the relationship has intensified since Germany announced the phaseout of nuclear power by 2022, increasing its need for alternatives.

Last week Gazprom, Russia's gas export monopoly and the world's largest gas company, announced exclusive talks with Germany's RWE for a joint venture in power generation, with an implied promise of fatter margins on its German sales.

On Tuesday, Medvedev will meet Merkel in Hannover to discuss stronger energy ties, with hardware in hand to meet a potential increase in German demand for Russian gas.

"Germany's decision to close its nuclear industry by 2022 opens up new (energy) partnership opportunities ... including increasing Russian gas deliveries using the capacity of the Nord Stream pipeline," the Kremlin said in a briefing paper ahead of the meeting.

Nord Stream, which runs under the Baltic Sea to Germany, will transport 63 billion cubic meters (bcm) of gas per year to Europe, around transit countries Belarus and Ukraine, where pricing conflicts have posed a threat to European supplies.

The first line of Nord Stream, which will carry 27.3 bcm --70 percent of the volume Germany imported from Russia in 2010 --will be launched in October and the second one next year.

"There may be yet another line (added to) North Stream," Russian Prime Minister Vladimir Putin said on Friday.

Gazprom, fighting pricing pressure from spot markets and weak sales in Europe's economic downturn, has strutted its resurgent position in Europe since the Fukushima nuclear crisis in Japan, saying consumers would be happy to accept new 20-year take or pay deals.

Europeans have been more receptive to Gazprom's overtures, which have in the past been read in European capitals as an effort by Russia to gain political clout through increasing the continent's reliance on Russian gas.

Reflecting unease about Russia's politics, a prominent German prize for freedom and democratic change will not be awarded this year after criticism of the award committee's choice of Putin as one recipient.

"We always said we are happy about each Russian investor who secures jobs in Germany and creates new ones. Russians are just as welcome here as American and French," said Eckhard Cordes, chairman of German-East European international trade association Ost-Ausschuss and chairman of Metro.

"This is also true for participations in the energy sector."

(Reporting by Alexei Anishchuk; Writing by Jessica Bachman; Editing by David Hulmes)