The new 760 mile (1200 km) Nord Stream pipeline under the Baltic Sea which will  bring Russian natural gas to Germany without the complications of transiting other states opened for business this week. The $12.4 billion pipeline is the most expensive underwater project in Europe since the Channel Tunnel. The pipeline was financed by the Germans through higher gas prices and hurts the Ukrainians who will lose part of their transit business.

In past natural gas price negotiations with Russia, Ukraine often leveraged its status as the primary transit state for Russian natural gas traveling to Europe. The Nord Stream pipeline has taken much of that leverage away from the Ukraine.

Relations between Russia and the Ukraine are again increasing in intensity as a new round of price negotiations is underway.  Twice in the past Russia shut off supply to the Ukraine which in turn disrupted supply to Europe in the middle of winter.  Kiev is now facing circumstances in which, if it does not compromise with Russia, a new energy crisis will likely occur before year’s end — a crisis that would be isolated to Ukraine, rather than affecting the rest of Europe as those previous energy crises have.

See also Russia tackles transit dependence.

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