Gas war may boost alternative routes to Europe

By Conor Humphries and Katya Golubkova - Analysis

MOSCOW (Reuters) - Russia's decision to cut gas exports to Europe via Ukraine in mid-winter may shock the continent into backing major new pipelines to bypass Ukraine, cementing Moscow's control over European gas supplies.

Plans for new trunk lines that would divert Russian gas north and south of Ukraine's troubled transit network have faltered as European leaders bickered over which routes to back and worried about giving the Kremlin too much control.

But a cut in supplies via Ukraine this week, the result of a dispute with Russia over debts and pricing, may force Europe's leaders to support alternative transit routes in an effort to diversify, analysts said.

"The result of the conflict will be ... more attention and desire from Western partners" regarding the diversification of transit routes from Ukraine, said Valery Nesterov, an analyst with Moscow-based brokerage Troika Dialog.

The risk for Moscow is that its part in the dispute will undermine Europe's trust and push the continent into the arms of alternative suppliers, analysts said.

To the north, the Kremlin is pushing the Nord Stream pipeline, which would bypass Ukraine by pumping 55 billion cubic metres of Russian gas under the Baltic Sea to Germany each year.

Until now, European Union states have been split on the merits of the project, which is 51 percent-owned by Russian gas export monopoly Gazprom.

Some, like Poland, worry it would boost Moscow's grip over the continent's supplies, while environmental concerns by Finland and Sweden have delayed the start of construction.