South Stream Begins in Serbia
The construction of a section of the South Stream gas pipeline in Serbia, which authorities in Belgrade expect to bring stability in gas supplies and economic prosperity, started on November 24 in the presence of top Serbian and Russian officials.
The pipeline section running through Serbia will see an investment of 1.9 billion euros, and construction began in the village of Sajkas, northern Serbia. Serbian authorities believe that some 2,500 workers will be directly involved in the works, with another 100,000 people engaged indirectly. It should also be noted that currently gas is delivered through a pipeline only via Hungary, hence this will secure an alternative route. Russian Gazprom is to lease the entire capacity of the South Stream section in Serbia for a period of 25 years.
“The beginning of construction of the South Stream pipeline, apart from energy security and the employment of people, enables Serbia to send a clear message that it is a country worth investing in and that it has workers who can carry out capital projects,” said Serbian President Tomislav Nikolic at the ceremony marking the start of building of the pipeline in Serbia.
The ceremony in Belgrade was not attended by Russian President Vladimir Putin, but he did send a message, in which he said that the pipeline would greatly contribute to enhancing international energy security. “South Stream will ensure stable fuel supplies for European consumers without transit-related risks,” said Putin.
The pipeline section through Serbia will be 421 kilometers long, and the construction of two branches is also planned – 52 kilometers to Croatia and 105 kilometers to Republika Srpska. A southern branch to Macedonia is also being considered, but is at present not economically justified. The South Stream section in Serbia is targeted for completion in two years. The capacity of that section of the pipeline will be 40.5 billion cubic meters per year.
The building of South Stream in Serbia is being done by a joint company based in Switzerland – South Stream Serbia, in which Srbijagas controls 49 and Russian Gazprom 51 percent.
The international gas pipeline South Stream, a project launched by Russian state-owned company Gazprom, is worth over 16 billion euros and will bring Russian natural gas through pipes underneath the Black Sea and on land via Bulgaria, Serbia and Hungary to consumers in Western Europe.
The beginning of the works was also an opportunity for Serbia and Russia to sign three more agreements: on financing the construction, on the transmission of gas and on declaring the South Stream section a project of national importance.
Chairman of Gazprom’s Managing Board Alexey Miller said South Stream would forever remove transit risks and secure stable gas supplies to consumers in Serbia and Europe. “South Stream is a new, shining page in the history of Russian-Serbian cooperation, Russian-Serbian friendship, and the Serbian section of South Stream is the key phase of the whole project,” said Miller. He pointed out that South Stream, which will have an annual flow of around 63 billion cubic meters of gas, would change the energy situation and become the most important element of Europe’s energy security.
When it comes to the project’s funding, the Serbian side will receive a loan from Gazprom totaling approximately 175 million euros. Annual interest on that loan will be 4.25 percent, with a grace period until the pipeline’s launch. “Those are the most favorable conditions possible and it is highly unlikely that we can get better ones,” said Srbijagas CEO Dusan Bajatovic, adding that the rest of the money will be secured through project financing.
However, not everyone was thrilled with the start of the project. Deputy Director of the Energy Community Secretariat Dirk Buschle said earlier that the agreement on the building of the South Stream pipeline in Serbia collided with European rules on many points. Buschle also said that if new energy infrastructure such as South Stream was being made, it had to be ensured that a third party benefitted from it as well. “There is a possibility to ask for an exception, but that requires the initiation of a procedure that was never initiated by Gazprom, Srbijagas or by any of the companies involved in the South Stream project,” he said.
But Serbian citizens have no doubts where South Stream is concerned. In a survey conducted by New Serbian Political Thought, conducted on a sample of 1,100 Serbian citizens between October 1 and 15, over 80 percent of those polled said the pipeline was very important for Serbia. About 63 percent believe South Stream will accelerate the state’s economic development, whereas 67.9 percent think the pipeline’s construction will increase employment in Serbia.
Igor Jovanovic