MINSK. April 5 (Interfax) - Russian President Vladimir Putin's order to build a second phase of the Yamal-Europe gas pipeline, which European media often call the Belarus Connector, is a dream come true for the Belarusian authorities, analysts in Minsk believe.

The project will enable Belarus to attract major direct investment, strengthen its status as a transit country for energy supplies to Europe and create new jobs, they said. On one hand, the project demonstrates increased support from the Russian leadership for the current political regime in Belarus, and on the other represents increased geopolitical pressure on Ukraine, which is refusing to sell its national gas transport system to Gazprom and is wary of joining the Customs Union of Belarus, Russia and Kazakhstan.

An expected surprise

Minsk was prepared for the idea of building the second strand of Yamal-Europe. Immediately after the completion of the first phase of the pipeline, Belarus repeatedly raised the issue of building a second, pointing to the economic viability of such a project for Gazprom.

In December 2012, after a meeting with Gazprom CEO Alexei Miller, Belarusian President Alexander Lukashenko said the Russian gas giant is interested in building a second strand of Yamal-Europe. According to Lukashenko, Miller said at the meeting that "all of the infrastructure is in place, all that's left to do is lay the pipe." The Belarusian president said the new phase of Yamal-Europe would be built before the South Stream pipeline and even before the second strand of Nord Stream.

"This is what we have always been seeking. We have always talked about the advisability of this alternative to Nord Stream and South Stream. It's gratifying that this advisability has finally been recognized by the Russian leadership," the director of the Systemic Analysis and Strategic Research Center of the Belarusian National Academy of Sciences, Sergei Dedkov said.

He said that "for Belarus this is direct investment and additional revenue from transit, additional jobs, in general the project is consistent with the goals of building a Union State."

The director of the Mezis Research Center, former candidate for the Belarusian presidency Yaroslav Romanchuk said that "Belarus, undoubtedly, is the beneficiary of this project."

"Besides economic bonuses, for the current Belarusian president this is political proof of the restoration of complete trust in him on the part of the Russian leadership. Alexander Lukashenko, in addition to the ambitious project to build a nuclear power plant, has received another ace for playing on the geopolitical ambitions of the Russian leadership. It won't be surprising if these aces will be used, among other things, to obtain new credit resources from Russia to support the existing model," Romanchuk said.

In 2007-2009, amid another escalation of gas relations between Moscow and Kyiv, Minsk tried to actively lobby for the construction of Yamal-Europe-2. In 2007, then Belarusian Prime Minister Sergei Sidorsky said that given the regular problems with transhipments of Russian gas through Ukraine it would be logical for Belarus and Russia to return to the idea of building a second strand of this pipeline. He said Belarus was holding negotiations on the project with Gazprom, and that German and Poland were interested in building the second phase.

However, Russia, which did not have full control over the Belarusian gas transport system at the time and recalled the gas disputes with Minsk in 2007, refrained from making new investments in the expansion of transit through Belarus.

The price

Gazprom acquired complete ownership of the Belarusian gas transport system, OJSC Beltransgaz, at the end of 2011 for a total price of $5 billion. Negotiations on the deal had been underway since the early 2000s and at the end of 2005 the parties agreed on the gradual sale, in 2006-2010, of 50% of Beltransgaz for $2.5 billion. At the beginning of 2011, on the eve of the currency and financial crisis in Belarus, the country offered to sell Gazprom the remaining 50% of the company for $2.5 billion. The deal was closed at the end of 2011 with a single payment.

Belarusian gas industry analysts believe the second phase of the pipeline could be launched as early as in a year to 18 months. Gas shipments to Europe via Yamal-Europe would increase from the current 33 billion cubic meters per year to at least 56.5 bcm. Building the section of the second strand from the German-Polish border to Nesvizha in central Belarus would cost about $2.6 billion, while the cost of the South Stream project is estimated at more than $10 billion and Nord Stream will require more than 5 billion euros.

Infrastructure built in the laying of the first phase of Yamal-Europe will reduce the cost and accelerate the construction of the second strand. All the engineering support, including power and water supply, approach lines and auxiliary buildings, has already been built. In addition, connectors were built that would make it possible to connect the new strand in sections without stopping the flow of gas in the first. Furthermore, earlier Belarus, trying to entice Russia into building the second phase of the pipeline, offered unprecedented customs and tax breaks for imports of equipment to build it.

The construction of the first phase of the Belarusian section of Yamal-Europe cost Gazprom an estimated $1.5 billion. Construction and reclamation firms, the railways and suppliers of materials were awarded contracts worth tens of millions of dollars and about 800 new jobs were created.

Yamal-Europe runs from Russia, through Belarus and Poland to Germany. Its construction began in 1994 and in 2006 the pipeline reached design capacity of 32.96 bcm of gas per year. This was the first major gas pipeline project since Comecon was disbanded. The pipeline runs more than 2,000 km and has 14 compressor stations, including 575 km and five compressor stations in Belarus - Nesvizhskaya, Krupskaya, Slonimskaya, Minskaya and Orshanskaya with combined capacity of 752 MW.

A signal to Ukraine

"In assessing the factors that led to revisiting the construction of the second phase of the Yamal-Europe gas pipeline, it is necessary to consider political realities. After the consolidation of 100% of shares in Beltransgaz, the Russian leadership's leverage over Belarus increased radically. Now Russia is trying to bring Ukraine into its orbit. And the project to build the second strand of the gas pipeline is first of all aimed at Ukraine with the goal of reducing transit through its territory as an incentive for integration," Romanchuk said.

Russia will gain additional leverage for the geopolitical game with Ukraine. "Construction of a gas pipeline is a relatively lengthy process. All of this time the expansion of cooperation between Russia and Belarus in the gas sector will play the role of a positive example aimed at Ukraine," Romanchuk said. However, Russia's gas pressure on Ukraine might be reduced "if the Ukrainians take a serious approach to shale gas, Gazprom missed this opportunity," he added.

Dedkov agrees that the decision to build the second phase of Yamal-Europe, bypassing Ukraine, is an indirect signal to this country, which is has refused to give Gazprom access to its gas transport system. "This is an indirect hint that cooperation with Russia and the Common Economic Space could give Ukraine similar results [in terms of energy prices and investment]. Of course this is an additional argument on the part of Russia," he said.

Ukraine has been trying for years to review gas agreements with Russia as it believes current gas prices are inflated. Gazprom presented Ukraine with a $7 billion bill for failing to take all contracted gas in 2012, a bill that Ukraine does not intend to pay. The parties are now holding negotiations on the creation of a trilateral consortium to manage Ukraine's gas transport system, which could help reduce gas prices.

It was reported recently that Ukraine bought virtually no gas from Gazprom in March after failing to agree on the price, and has begun receiving gas from Hungary.

Gazprom believes Ukraine's purchases of gas from European Union countries are reminiscent of fraudulent scheme. "As for the issue of reverse gas supplies from the European Union to Ukraine, we are well aware of these plans, but we suspect that there are no reverse shipments. Actually, de facto physical gas is not being proposed, it is proposed to use Gazprom gas in a kind of virtual reverse," Miller said last week.

"In other words, Gazprom gas enters Europe and immediately turns back to Ukraine. [