Prime
Minister Vladimir Putin said Friday Russia needs to start work on the South
Stream natural gas pipeline at the end of 2012, even as it continues talks with
Ukraine about expanding the
country's gas transport system as an alternate route to Europe.
Any moves toward building South Stream increase pressure on Ukraine,
analysts said. Kiev is pushing for cheaper gas
in order to balance its budget, but in exchange for lower priced gas, Moscow is aiming to gain control of Ukraine's
pipeline system.
Russia Wednesday secured
approval from Turkey to
build the South Stream gas pipeline across the Black Sea, removing the last
major obstacle to proceed with a project that could increase Europe's
dependence on Russian natural-gas supplies.
The move heats up the battle between Russia
and the European Union over competing pipelines, especially the EU-backed
Nabucco project, and increases pressure on Ukraine
to give Moscow
control of its pipeline system.
"I think that it would be desirable anyhow to start at the end of next
year" with construction of South Stream, Putin told OAO Gazprom (GAZP.RS) Chief Executive Alexei
Miller Friday at a meeting outside Moscow, according to Russian news agencies.
Putin also asked Miller to continue talks on setting up a "gas
transportation consortium" with Ukraine. Ukraine values its gas-transport
system at $20 billion, but modernizing the infrastructure could cost between EUR2
billion and EUR8 billion, Miller told Putin, according to the newswires.
Ukraine
is asking for an annual discount on gas of $9 billion for letting Russian
jointly manage its gas-transport system, Miller said.
Moscow and Kiev
are set to resume gas talks in January.