Oettinger takes lead in legal spat with Russia over South Stream


Energy Commissioner Günther Oettinger said yesterday (12 December) that the EU executive had accepted to represent the seven countries embroiled in a legal dispute with Russia over the South Stream gas pipeline, stressing that bilateral agreements with Moscow must respect EU law.

Six EU countries have signed inter-governmental agreements (IGAs) with Russia over South Stream – Austria, Bulgaria, Croatia, Greece, Hungary and Slovenia. Serbia, which is part of the EU-backed Energy Community, also signed a similar bilateral deal (see background).

Oettinger received the energy ministers of the seven countries involved in Brussels yesterday (12 December) to discuss the way forward after the Commission announced that the bilateral deals were in breach of EU law and had to be scrapped.

Responding to a question from EURACTIV after the meeting, Oettinger said ministers had given the Commission a mandate to lead negotiations with Russian counterparts and request “any changes that may be necessary to intergovernmental agreements that have been adopted bilaterally”.

The language used by Oettinger appears to be more diplomatic than words used by one of his own officials, who had previously said that the bilateral agreements were in breach of EU law and had to be renegotiated from scratch. Details from the Bulgaria-Russia IGA disclosed by EURACTIV suggest that massive changes to the agreement would be needed.

Russia indifferent

However, it remains unclear to what extent, if at all, Russia would be ready to re-negotiate the IGAS.

Gazprom, in particular, appears to adopt a “business as usual” attitude. Its CEO, Alexei Miller, attended a signing ceremony with Hungarian Prime Minister Viktor Orbán today in Budapest, marking the beginning of the planning phase to build the Hungarian stretch of the pipeline.

Oettinger said the Commission had welcomed the trust that member states had placed in the EU executive to lead the negotiations and pledged that his services would ensure respect for European law in the context of talks with Russian partners.

Asked how the Commission would sit on a strictly bilateral negotiating table between individual countries and Russia, Oettinger replied: “We received a mandate which was endorsed by all member states to negotiate with Russia on their name and we have powers on the base of the European [law]."

"We are acting like lawyers for our member states and will advocate, as in real life when an advocate is negotiating on behalf of his client, this is the role we are playing vis-à-vis our Russian partners,” the commissioner said.

Oettinger also made it plain that the Commission was not hostile to the project and saw it as “an important complement to our pan-European network”.  

“But we want to make sure that the European rules with regard to environment, to the granting of contracts and with regard to energy law regarding unbundling, transparency, third party access will have to be respected," he added.  

Oettinger rejected suggestions that the Commission was adopting a stricter stance on South Stream than with similar past projects such as Nord Stream, where German investors were involved.

Pressed to contrast the Commission's approach on the two projects, Oettinger said that the EU was applying its rules irrespective of who was the owner, the investor or the operator. A request to exempt Nord Stream from EU laws preventing energy firms from simultaneously owning production and transmission assets – so-called energy unbundling rules – had indeed been granted, he said, but only after careful analysis.

In the case of South Stream, no requests for exemptions have been made, Oettinger said.

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.

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