Beneath the Baltic Sea, a pipeline is being built between Russia and Germany. Slated for completion by 2010, the 744-mile Northern European Pipeline is a $5 billion project that will pump billions of cubic meters of natural gas from Western Siberia to Germany and the rest of Europe. More importantly, the project has come to symbolize Europe's growing reliance on Moscow for its ever-expanding energy needs; in fact, the consortium in charge of the project just hired former German Chancellor Gerhard Schroeder to head the effort. Three-quarters of Europe's natural gas will be imported by 2020, the bulk of which will come from Russia. But some experts say Europe's reliance on Russian gas is problematic, particularly if Moscow makes a pattern of using energy as a tool for foreign policy. Hence, the chorus of complaints from European capitals after a recent energy standoff between Kiev and Moscow threatened to disrupt the continent's gas supplies. The crisis comes as Russia, which holds the world's largest known gas reserves, assumes the rotating chairmanship of the Group of Eight (G8), the club of the world's richest democracies. Interestingly, President Vladimir Putin's main theme for his chairmanship: energy security.

For the past few decades, the EU has sought to wean itself off energy supplies in volatile regions like the Middle East. Russia was always seen as a more stable alternative. But after Russia's recent energy row with Ukraine, European leaders are wondering aloud if this is the case. "A lot of people in Europe are baffled [as to] why Putin would make such a blatantly stupid move," says William Drozdiak, president of the American Council on Germany. "It suggests he's in a bubble." Says Julian Knapp, senior program officer of the Aspen Institute Berlin: "People [in Europe] now have a more critical eye toward what Russia is doing." Ronald Reagan warned European leaders more than two decades ago about the dangers of relying too much on Russian energy because of the threat of the Kremlin using this reliance as a political tool for foreign policy. "Putin has now come along to validate Reagan's suspicions," writes Jim Hoagland in the Washington Post.

One way for Europe to rely less on Russian gas is to develop alternative energy sources, experts say. There is the nuclear option, which remains an emotive issue for many Europeans. France, for example, shifted to nuclear energy after the oil shocks of the 1970s. Currently, three-quarters of its electrical power comes from nuclear plants. In Britain, there is ongoing debate over whether to develop a new set of nuclear plants. Without such plants, and with its energy supplies from the North Sea running dry, Britain is expected to rely on Russian gas to supply 70 percent of its power by 2020, according to the Financial Times.

The issue of nuclear power, however, is most contentious in Germany. Under a 2001 deal by the former coalition parties in power, the Social Democrats and the Greens, Germany had planned to shut down all nineteen of its nuclear reactors by 2020. "It was the Greens' banner issue," says Andrew Nagorski, an expert on the region and senior editor with Newsweek International. Now, with conservatives at the helm, particularly the Bavarian Christian Social Union (CSU), this plan may get reexamined. "In the long term, there is no alternative to nuclear power," CSU leader Markus Soeder recently told NTV. Even the Greens have privately reconsidered their plans to close these plants, Drozdiak says. The Social Democratic Party (SPD), meanwhile, has sought to shift 20 percent of Germany's energy output toward renewable resources by 2020.

Germany guzzles more of Russia's gas than any of its European neighbors. Perhaps that is why its relations with Moscow are so chummy. Because of his outspoken advocacy for the pipeline's creation while in power, Schroeder was panned in the press for accepting the chairmanship of the project—and its lucrative salary. "It's as if Jimmy Carter had negotiated the return of the Panama Canal to Panama, and then signed a lucrative contract to manage the shipping lanes," wrote Washington Post columnist Anne Applebaum in a December 15 op-ed.

Experts predict future German-Russian relations under the new chancellorship of Angela Merkel to remain strong, but become less personal. Merkel, who hails from East Germany and speaks fluent Russian, "will be much more skeptical of Putin's authoritarian style," Drozdiak says, adding, "You can imagine the distrust she may feel toward a former KGB agent in East Germany." Ulrich Speck, a Berlin-based commentator, agrees. "Merkel will act much more in accordance with European ideas and interests than Schroeder did," he says. "That means she will always take the interests of the East European members of the EU [European Union] into account. She already has made the proposal to open up the [Northern European] pipeline project for East European states."

That may not sit well with Russia, whose relations with its former satellites in Eastern Europe have worsened in recent months, as evidenced by the recent energy spat with Ukraine. Latvia and Lithuania boycotted the sixtieth anniversary celebrations of Victory in Europe Day (VE-Day) last May, partly for Putin's refusal to renounce the 1939 pact that handed their sovereignty over to Nazi Germany. Russians living in the Baltic region, most of them urbanites, complain of unfair treatment at the hands of local authorities. And relations between Russia and Poland, never good to begin with, may be at an all-time low. Much to the ire of Moscow, Poland openly backed the pro-Western candidate Victor Yushchenko in the 2004 Orange Revolution in Ukraine, and not the Kremlin's choice candidate Viktor Yanukovych. Then, last summer, Polish diplomats were beaten in Russia's capital one week after the children of three Russian diplomats were attacked by Polish skinheads in Warsaw. But the biggest blow to these countries' already fractured relationship came in December, when Germany and Russia cut the ribbon on the Northern European pipeline, which purposely skirts Poland. "Schroeder was the one who rammed this pipeline deal through and gave Poland and Germany's other neighbors the back of his hand when they voiced concern," Nagorski says.

Chancellor Merkel travels to Washington for talks with President Bush January 13-14. She is seeking to repair Germany's relationship with Washington in the wake of the Iraq War, which Berlin vociferously opposed. Merkel has also pressed for the release of a German-born Turkish Muslim, Murat Kurnaz, imprisoned at Guantanamo Bay, as well as the dismantlement of that notorious detention facility. In a recent interview with Der Spiegel, she talked about the current state of German relations with the United States versus those with Moscow. She described the relationship with Washington as a "friendship" but called German relations with Russia a "strategic partnership." "I don't think we share as many of the same values yet with Russia as we do with the United States," Merkel told the magazine. Further, Germany has lobbied the United States and Russia, both veto-wielding members of the UN Security Council, for its bid to gain a permanent seat on the Council, though Drozdiak says this issue will not dominate the agenda.

The issue of energy security is increasingly playing an impact on U.S.-Russian relations. U.S. Secretary of State Condoleezza Rice criticized Russia for its "politically motivated efforts to constrain energy supply to Ukraine," drawing a rebuke from Russia's Foreign Ministry. But Russia has U.S. energy consumers in mind as well. Russia's state-controlled energy giant, Gazprom, has sought a 10 percent U.S. market share by 2010, according to the company's deputy chairman, Alexander Medvedev. From Russia's standpoint, the United States is especially seen as a lucrative export destination for liquefied natural gas (LNG), shipped via Russia's Shtokman field in the Barents Sea, north of the Arctic Circle (LNG is gas frozen into liquid and shipped in refrigerated tankers and then warmed back into its gaseous state on delivery).

There are a number of problems with the world's growing reliance on Russia as its principal supplier of energy. Because of its energy dependency, Europe has been hesitant to criticize Russia for human rights abuses, experts say. European leaders, for example, have voiced only muted complaints about the Kremlin's heavy-handed tactics in the Caucasus, where rebels have waged an off-and-on insurgency since the mid-1990s. Drozdiak says Merkel will likely raise this issue with Putin when she visits Moscow later in January. Europe has also been noticeably quiet on Putin's recent crackdown against independent media and nongovernmental organizations. Finally, Russia's ability to exploit energy as a strong-arm tactic to achieve its foreign policy objectives sets a dangerous precedent. As Daniel Twining, a fellow with the German Marshall Fund of the United States, writes in the Weekly Standard, "A closer look at the way Russia has wielded energy supplies to support its allies and bludgeon its rivals in Eurasia suggests that major economies increasingly dependent on Russian gas and oil exports—including great powers in Europe and Asia, and even the United States—are rendering themselves vulnerable to the ambitions of an autocratic, imperial state that has not refrained from using energy as a geopolitical weapon and has been ruthless in its treatment of both internal political opponents and neighboring states."