Greek Prime Minister Kostas Karamanlis signed an agreement with Moscow on Tuesday (29 April) to start construction on the South Stream pipeline, pouring cold water on the rival Nabucco project championed by the EU.
South Stream was launched in 2007 by Italy's Eni and Russia's Gazprom. It is designed to pump 30 billion cubic metres of Russian gas a year to Europe, under the Black Sea via Bulgaria, Greece, Serbia and Croatia to Italy. Under the plans, one of its branches will go through Hungary, which recently joined the project, and reach Austria.
Speaking to reporters after the signing ceremony in Moscow, Russian President Vladimir Putin derided EU efforts on Nabucco. "Please, if someone can find some other similar project under economically acceptable terms that can guarantee products of a sufficient volume for these gas systems, we will only be glad," Putin said according to the Associated Press.
"Realising the South Stream project doesn't mean that we are fighting some other alternative project," he added.
Nabucco in the doldrums
By contrast, Nabucco would bring gas from the Middle East and Asia to Europe via Turkey, Bulgaria, Romania, Hungary and Austria. The project is geopolitically significant because it will bypass Russia, but the project, scheduled to be completed by 2013, has encountered financing problems and a lack of political will from some member states.
Russia attaches importance to the South Stream project, estimated to cost some €10 billion, because it bypasses Ukraine and would probably make Nabucco redundant. Moscow is also trying to pre-empt any plans to bring gas to Europe from Central Asia, bypassing Russia. Gazprom CEO Alexei Miller famously mocked the ambitions of the EU project, saying "Nabucco is an opera, not a pipeline".
Recently, Russian Ambassador to the EU Vladimir Chizhov dismissed the potential of the Nabucco project, especially the plans to bring gas from Turkmenistan or Azerbaijan, labelling the resources of the two Central Asian countries insufficient. The only way to fill the Nabucco pipeline is with Iranian gas, he said.
Russia reasserting ties with South Eastern Europe
Gazprom is also very close to finalising an energy agreement with Serbia, where a 400-kilometre section of the South Stream pipeline will be built. As part of the deal, Gazpromneft will acquire a 51% stake in Serbia's state-owned oil company, NIS, for €400 million.
This pipeline project and others seem to go hand in hand with Russia's ambition to reassert its ties with transit countries. Russian friendship with Greece and Serbia has historic roots. The relations with Belgrade developed greatly in opposition to the major Western players over Kosovo, and could blossom even further if a nationalist and anti-EU government takes over following the elections on 11 May. Russia's relations with EU members Hungary and Bulgaria have also perceptibly improved.
Senior EU statesman sought to head South Stream
Gazprom is also obviously looking for a senior EU statesman to head the South Stream project. Italy's outgoing prime minister, Romano Prodi, has declined Putin's offer, an Italian cabinet source recently disclosed. Such an appointment would mirror German Chancellor Gerhard Schroeder's appointment to Gazprom's Nord Stream pipeline. The position is obviously still open.
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