Russian media quote Prime Minister Vladimir Putin as announcing on May 14 that the state pipeline monopoly Transneft has chosen the port of Ust-Luga, in Russia's northern Leningrad Oblast, as the terminal for the new pipeline.
The idea for the Baltic Pipeline System-2 (BPS-2) was first floated in January 2007 following a bitter dispute with Belarus over oil-transit fees that briefly disrupted supplies to Europe.
Once the pipeline is completed, Russia is unlikely to fully suspend oil transit through Belarus. But Yury Drakakhrust, a correspondent for RFE/RL's Belarus Service, says the new pipeline will severely dent Belarus's economy and bargaining power:
"Russia will be able to maneuver transit, send some of its oil here, some of its oil there," Drakakhrust says. "So this undoubtedly undermines Belarus's economy. Many steps that Minsk has taken over the past year -- the feverish search for oil delivery partners in Venezuela, in Iraq, in Azerbaijan -- are attempts to compensate for this Russian blow, for this loss of monopoly status as a transit country."
The pipeline certainly threatens to deprive Belarus of its current leverage vis-a-vis both Russia and Europe.
Speaking in an interview with Reuters news agency earlier this week, President Alyaksandr Lukashenka used the energy card to press Europe to oppose a U.S.-led campaign to impose sanctions on the authoritarian regime in Minsk.
"The United States wants the European Union to impose sanctions against Belarus," he said. "And now they want the Europeans to join in. ... You can if you wish. But don't forget that 50 percent of your oil and oil products and 30 percent of your gas passes through Belarus."
Freeing Russia From Transit Fees
The BPS-2 would be part of the Baltic Pipeline System, an existing pipeline that pumps oil from western Siberia to the Primorsk port on the Gulf of Finland. It would branch off the Druzhba pipeline near the Belarusian border and travel through the Russian regions of Bryansk, Pskov, and Leningrad before reaching Ust-Luga on the Gulf of Finland.
Yevgeny Volk, who heads the Moscow branch of the U.S. Heritage Foundation, says the BPS-2 route also aims at freeing Russia from transit fees to Baltic countries:
"The idea is to get rid of the independence on terminals located in the Baltic States," Volk says. "This is part of [Russia's] drive to ensure that the profits from the transportation and processing of Russian energy resources go to Russia and not to the Baltic States, which objectively received handsome profits from the transit of Russian deliveries through their territories."
Putin said Transneft had examined six routes before opting for Ust-Luga, which it claims is the most environmentally friendly.
Transneft reportedly estimates the cost of BPS-2's construction at around $3 billion.