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By Dmitry Zhdannikov and Denis Pinchuk
ST PETERSBURG, Russia, June 16 (Reuters) - Russian gastransit to Europe via Ukraine will fall steeply after 2020 oncestate gas giant Gazprom has built a new pipeline underthe Baltic Sea, Gazprom head Alexei Miller said on Thursday.
Ukraine has been the main transit route for Russian gas tocentral and Western Europe since Soviet times, delivering morethan 100 billion cubic metres (bcm) or over a quarter of thecontinent's needs during peak years.
Pricing disputes with Ukraine have prompted Gazprom to buildnew lines including via Belarus and under the Baltic Sea toGermany, reducing transit via Ukraine to 50-70 bcm a year inrecent years.
Russia's annexation of Crimea from Ukraine and support forseparatists in eastern Ukraine have sent relations betweenMoscow and Kiev to an all-time low. Russia has cut gas suppliesto Ukraine and threatened to reduce transit by rerouting gas.
Miller, speaking at an economic forum in St Petersburg, saidtransit would fall to 10-15 bcm a year, which would be only atenth of the existing capacity and less than a quarter oftransit volumes in recent years.
The move would allow Gazprom to save $1.6 billion a year bynot investing in maintaining old pipelines transiting Ukraine,Miller said.
Gas will instead be delivered via the second leg of the NordStream pipeline under the Baltic Sea to Germany, which Gazpromwants to build with European companies such as Royal Dutch Shell despite opposition from some European Union countries.
Miller said pipe-laying for Nord Stream would start in early2018. He defended the project as the most efficient andecologically friendly given that it would be a much shorterroute to deliver gas from Arctic fields to European customers.
Last year, Gazprom signed a shareholders' agreement on NordStream-2 with E.ON, BASF/Wintershall, OMV, ENGIE and Shell withthe aim to start supplies at the end of the decade.
The United States criticised the project, saying it was moreabout politics than economics as it would allow Gazprom to cutoff Ukraine and would have a devastating impact on the countrywhile damaging Eastern Europe's energy security.
Gazprom is fighting to defend market share in Europe in theface of oversupply, betting on rising long-term demand asEurope's own gas output declines and as the United States plansto start large-scale exports of liquefied natural gas.
Gazprom has put the cost of Nord Stream-2 at up to 9.9billion euros ($11.2 billion), with the consortium planning tobuild a third and fourth pipeline to transport up to 55 billionadditional cubic metres of gas a year.
It would double the capacity of lines 1 and 2, which takethe same route. The new pipelines are due to start transportinggas in 2019.($1 = 0.8879 euros) (Reporting by Dmitry Zhdannikov and Denis Pinchuk; Editing byJack Stubbs and Dale Hudson)
