South Stream: Speeding Up to Where?
Gazprom focuses on South Stream’s onshore section
After Ankara issued permits in late December for Gazprom’s South Stream to be built under Turkish territorial waters, Russia has turned its attention to the onshore route of the planned natural gas pipeline. On 11 January, Gazprom CEO Alexei Miller discussed South Stream with Russian President Dmitry Medvedev with the latter saying that he hopes that execution of the project will be intensified in the context of the decisions made by the Turkish party. Miller said that upon granting a permit to build South Stream in its exclusive economic zone, Ankara actually resolved all those issues that Gazprom had faced at the early construction phase of South Stream. “Pursuant to the Government decision, Gazprom approved in late 2011 the relevant documents on stepping up the operations within the South Stream project as well as on launching the project construction in late 2012 instead of 2013,” Miller said, referring to Russian Prime Minister Vladimir Putin’s order to speed things up.
Denis Ignatyev, head of Gazprom’s Foreign Mass Media Division, told New Europe on 11 January that the company is now working on South Stream’s implementation and is in negotiations with its partners but could not make public any information about the routing until everything will be ready. According to media reports, Miller earlier presented to Putin an alternative route that showed that instead of splitting in Bulgaria, a single pipeline would continue to Serbia, Hungary, Slovenia, and Northern Italy. Gazprom would not comment on the media comments that South Stream was planning to drop the Bulgaria-Greece-Southern Italy pipe. Such plans would reduce Sofia’s role as a transit hub. “The proposal to drop the Bulgaria route is undoubtedly linked to Bulgaria’s intransigence over the Burgas-Alexandroupolis oil route,” Chris Weafer, chief strategist at Troika Dialogue in Moscow, told New Europe on 13 January. “Russia is very keen to build both a northern Bosporus bypass route in addition to the Turkish bypass route but has become very frustrated by the Bulgarian refusal to back the project. But, until the decision is finally made whether to build South Stream or not, the actual route network remains an academic political rather than an engineering discussion," Weafer said.
It still makes much more commercial sense to upgrade the Ukraine transit pipe and expand the existing Europe network than to go ahead with South Stream, Weafer said. Therefore, the political rhetoric and apparent urgency concerning South Stream is a way for Russia to keep pressure on Ukraine to concede ownership over the transit pipeline, he said. “If Kiev does agree to allow Gazprom an equity position in the pipe and the original proposal to also allow some EU involvement in the pipeline is also agreed, then I believe both the South Stream and Nabucco projects will be shelved,” Weafer said. “But, Putin’s determination to push ahead with South Stream negotiations shows that he is determined to get one or the other and quite soon; either Russia gets some ownership of the Ukraine transit pipe and Nabucco dies or the South Stream pipe will be built and the Ukraine route will gradually be marginalised even more,” he added. This latter outcome would be Kiev’s worst nightmare.
Source: New Europe