Russia puts end to gas wars

Russia has brought to an end the long-running debate over securing gas supplies to the EU, bringing all its European partners together to sign the landmark agreement giving the green light to construction of the South Stream gas pipeline.

The first day of the annual International Investment Forum in Sochi has been dominated by  European energy giants signing up for the ambitious project.­

The $25 billion South Stream project will eventually pipe gas from Russia to Europe under the  Black Sea, and then via Bulgaria, Greece and Serbia, bypassing traditional transit countries like Ukraine and Poland.

In Bulgaria, the pipeline will bifurcate to deliver gas to European consumers in Austria and Italy.

Russia has spent four years gathering partners and enlisting states to implement the project. On Friday September 16, all the parties has come together to finalize the deal.

The shareholder agreement signed on Friday divide up the stakes in the project. Russia’s Gazprom gets 50 per cent plus one controlling stake, Germany's Wintershall, a unit of BASF, and France's EDF each acquire 15 percent stakes, with Italy’s Eni getting the remaining 20 per cent.

RT correspondent Dmitry Medvedenko, who is at the annual International Investment Forum in Sochi, stressed that the signing of the South Stream agreement means the project is now a concrete reality – a fact which has sparked concern amongst European authorities. 

The EU Commissioner for Energy, Gunther Ettinger, has been quick to stigmatize the project as a “threat to European energy security.” His comments came as the EU’s two gas projects, Nabucco and the trans-Caspian pipeline designed to deliver Central Asian gas to Europe, have met with insuperable difficulties. Both projects still remain at the outline stage, and are as far from realization as they were they day they were announced.

Commissioner Ettinger says the South Stream project is too expensive and that Russia is using gas as a political tool, once again underlining the presence of a strong anti-Russian lobby in Europe.

Aleksandr Medvedev, Deputy Chairman of the Board of Executive Directors of Gazprom, argues that the South Stream poses no threat to the Nabucco plan as the two projects are of a different nature.  

“We never considered Nabucco as a competitor project because these two projects have different aims. Our project aims to diversify the transit routes of Russian gas to our markets – we have customers, we have partners, we have unique technical experience including the ‘Blue Stream.’ And Nabukko has the aim of diversifying the sources of supply. And I still don’t see where this supply is,” says Medvedev.

“Nevertheless, if the Nabucco scheme happens, it will only help to meet the additional demand of the European economies. To treat the South Stream as a threat to Nabucco is a very strange approach. I don’t understand what’s behind such a statement,” the official stated.

On the day the South Stream agreement is signed, Russia’s neighbour Ukraine, the biggest transit country for Russian hydrocarbons, has spoken out, with President Viktor Yanukovich saying his country wanted to see the South Stream pipeline built on its territory. Kiev believes this would make the project “five times less expensive.”

The deputy head of Gazprom’s board, Valery Golubev, has already labeled the idea as inefficient,  saying there is no sense in using Ukrainian territory if the project could be realized in a more direct way.

“They have been proposing the idea for quite some time,” commented Golubev, saying he sees the idea as impractical. 

The idea for the South Stream project and its counterpart, the Nord Stream project – which has just come into operation – was born as a result of a series of conflicts between Russia and Ukraine which began in 2005 and earned the name “gas wars”. Ukraine used the transit pipeline running through its territory from Russia to Europe to blackmail the Russian government into giving it cut-price gas for domestic use. On more than one occasion, Ukraine completely cut the gas supply to Europe in winter time, threatening to freeze out Gazprom’s customers in Europe. Ukraine was also caught illegally taking gas from the transit pipeline.

Both South Stream and Nord Stream projects are aimed at securing the gas supply to Europe by constructing pipelines which bypass Ukrainian territory.

­Despite the Nord Stream and South Stream projects, the EU remains supportive of projects like Nabucco because they “provide gas from new sources via a new route which means diversification of supply,” reveals Julian Lee, Senior Energy Analyst at the Center for Global Energy Studies.

“Europe is trying to add variety to its sources of gas supply and it does not want to be overly dependent on Russian gas, North African gas or North Sea gas. Europe is seeking to find balance between a variety of suppliers, delivering gas through a variety of routes. Nobody is disputing that Russia is and will continue to be the most important.”