EC: Russia Should Apply for South Stream Exemption
The European Commission has suggested that Russia should proceed with making an application for an exemption to EU rules for the South Stream gas pipeline.
"We would like Russia to ask formally for exemptions so that we can actually look at them," said Marlene Holzner.
Ms. Holzner, the spokesperson for Energy Commissioner Oettinger, made the comments Friday, following the public disclosure of a key element of the EU's position on Wednesday.
Speaking at an EU Parliament event hosted by Natural Gas Europe | Gas Dialogues, Klaus-Dieter Borchardt, director for energy markets at the European Commission, said that bilateral agreements between Russia and the countries through which South Stream is to transit, were not in line with present EU policies, that the EU member countries involved in the project need to amend the agreements accordingly.
“The Commission has looked into these intergovernmental agreements and came to the conclusion that none of the agreements is in compliance with EU law," Borchardt said.
Russia has entered into bi-lateral agreements for the construction of the South Stream pipeline with EU members Bulgaria, Hungary, Greece, Slovenia, Croatia and Austria, as well as Serbia, which is a member of the Energy Community.
"What I can say is the intergovernmental agreements will not be the basis for the construction or the operation of South Stream. Because if the member states or states concerned are not renegotiating, then the Commission has the ways and means to oblige them to do so. And South Stream cannot operate under these agreements,” continued Borchardt.
Holtzner said that the European Commission expects member countries to ask Russia for new negotiations on the agreements to bring them in compliance with EU law.
As Borchardt outined on Wednesday, Holtzner pointed to key points at odds with EU legislation.
One of these is "unbundling," which requires the separation of producers and suppliers of natural gas from ownership of the transmission network.
The two other key issues are third party access of other users to the pipeline and the issue of the setting of tariffs that European countries will have to pay for using the gas pipeline.
"We believe that in the European energy market, gas security and also competition is best served if there is not one company importing and producing gas and owning the pipeline, fixing the tariff, but we would like to see that there is an unbundling," Holzner said.
Borchardt said that the EU was open to the discussion of an exemption for South Stream, but that those discussions would open up only when gas capacities would start to be allocated to the different segments of the pipeline. This timing appered to be confirmed in comments by Alexander Medvedev, Deputy Chairman of the Management Committee; Director General of Gazprom Export, who also spoke at the Natural Gas Europe event.
But Alan Riley, Director of the LLM Programme, City Law School, says that the road to receiving an exemption is not so clear.
Professor Riley, an expert in energy competition issues, explained that present EU laws state that new supply that adds to competition is a requirement to receive an exemption, while South Stream is a "diversion pipeline," which effectively is delivering established supply.