EurActiv.com

EU news and policy debates across languages

28/07/2016

South Stream ‘Plan B’ opts for route through Greece and Turkey

Energy

South Stream ‘Plan B’ opts for route through Greece and Turkey

pipeline.jpg

A Russian newspaper has published an article suggesting that the Kremlin-favoured South Stream gas pipeline could drop Bulgaria, Serbia, Hungary, and Slovenia for its route, and instead reach its final destinations, Italy and Austria, through Turkey and Greece.

On Monday (18 August), Russian business newspaper Vzglyad published an article by journalist Oleg Makarenko, claiming that Gazprom has a “plan B” in case Bulgaria continues to obstruct the construction of the South Stream pipeline.

A caretaker government in Sofia, which took office on 6 August, has frozen the construction of South Stream, following clear indications from Brussels that the EU executive would impose infringements on Bulgaria, unless the country re-negotiates its bilateral agreement with Russia for the construction of the pipeline, which is in breach of EU law.

>> Read: Barroso warns Bulgaria on South Stream

According to the Vzglyad article, Russian President Vladimir Putin has already hinted at another route for South Stream, during his meeting with leaders of world media, on 24 May.

The article quotes Turkish energy Minister Taner Y?ld?z as saying that Ankara would allow South Stream to reach Turkey under the Black Sea instead of Bulgaria, as originally planned.

However, Russian sources are quoted as saying that the Turkish route is not Moscow’s preferred one, as it is longer, and because of the lost possibility of reaching Serbia and Hungary.

‘Good partners’

Turkey is seen as a “good partner” for Russia, as its former Prime Minister Recep Tayyip Erdo?an, who recently was elected as President, is described as a “cynical pragmatist” who wants revenge on the USA, which has reportedly tried to oust him twice. Greece is described as a country where social unrest is boiling. “The attempts to leave Greece without money, without agriculture [as a result of the Russian counter-sanctions] and without gas will trigger massive social unrest,” the article says.

Bulgaria, Serbia, Hungary and Romania are described as the biggest victims of plan B. In the event that the Ukrainian gas transmission system is “blocked permanently”, Russia would reportedly not be able to supply any gas to these countries.

The article ends by saying that Russia would prefer not to opt for a plan B, but if the Commission doesn’t stop pressuring Bulgaria to freeze the construction of the pipeline, this alternative appears to be a viable option.

“We have to be very happy that Russia has a working spare plan to supply gas to Southern and Central Europe,” the article concludes.

A direct competitor to TAP?

If Gazprom decides to choose Turkey and Greece for the South Stream route, the pipeline project would largely resemble the TANAP-TAP project to bring Azeri gas to Italy through the territories of the same countries.

The Trans-Anatolian gas pipeline (TANAP) is a proposed natural gas pipeline from Azerbaijan running through Turkey. The approximately 870 km long TAP pipeline connects with TANAP, and will cross Greece and Albania before reaching Italy through an offshore section. It is to be built by a consortium led by BP, Norway’s Statoil and Azerbaijan’s SOCAR.

TAP is in an advanced stage of preparation and the start of its construction is planned in 2016.

Asked by EurActiv to comment, the European Commission said it was unable to confirm reports that NGOs were funded with Russian money, in order to delay the TAP project. 

Background

South Stream is a Russian sponsored natural gas pipeline. As planned, the pipeline would run under the Black Sea to Bulgaria, and continue through Serbia with two branches to Bosnia and Herzegovina and to Croatia. From Serbia the pipelines crosses Hungary and Slovenia before reaching Italy [see map]. Its planned capacity is 63 billion cubic metres per year (bcm/y).

The key partner for Russia's Gazprom in the South Stream project is Italy's largest energy company, ENI.

Russia signed intergovernmental agreements with:

  • Bulgaria – January 18, 2008;
  • Serbia – January 25, 2008;
  • Hungary – February 28, 2008;
  • Greece – April 29, 2008;
  • Slovenia – November 14, 2009;
  • Croatia – March 2, 2010;
  • Austria – April 24, 2010.

Last December, the Commission said that all bilateral agreements (IGAs) for the construction of South Stream are all in breach of EU law and need to be renegotiated from scratch [read more].

EurActiv has seen a letter sent by the Commission to the Bulgarian authorities, dated 14 August 2013, which analysed the Bulgaria-Russia agreement in great detail. The six-page document, addressed to the Bulgarian deputy energy minister, Evgenia Haritonova, has never been made public, despite pressure by some MPs in the Bulgarian Parliament to disclose it.

Apart from breaches to EU energy market rules forbidding energy producers from simultaneously owning transmission networks (so-called ownership unbundling), which are common to all seven agreements, the letter identifies the following grievances:

  • Bulgaria committed to provide the most favourable tax regime to Gazprom, which according to the EU Commission is in breach of the EU's state aid rules;
  • At one point, the inter-governmental agreement (IGA) stipulates that Bulgarian and Greek companies would be subcontracted, and at another, that preference would be given to companies from the states of the Parties (Bulgaria and Russia), which is against EU competition rules;
  • The IGA stipulates that tariffs for using the pipeline would be established "by the Company", which is in contradiction with the powers of the national regulator to approve transmission tariffs in accordance with EU law.

Further Reading