Russia to build South Stream at ‘maximum capacity’


Russian President Dmitry Medvedev ordered Gazprom chief Alexei Miller to start building the South Stream gas pipeline at "maximum capacity".  The move is a countermeasure against Ukraine "siphoning" gas from the pipelines transiting trough its territory.

Medvedev received Miller in the Kremlin and asked him to report on the situation over the February cold snap, when the demand for gas greatly increased both in Russia and Ukraine, as well as in Western countries.

"On certain days, as much as 40 million cubic metres of gas remained on Ukraine's territory, and this certainly caused damage to Gazprom's finances and reputation. At the same time, in this situation, there is no effective mechanism to control the actions of [Ukrainian gas monopoly] Naftogaz in Ukraine," Miller answered.

"Do I understand correctly that this means siphoning off gas?" asked Medvedev, according to a transcript of the discussion published on the Kremlin's website. In an apparent effort to impress foreign counterparts, Prime Minister Vladimir Putin also conspicuously published the transcript of his recent instructions to Miller.

Formally Gazprom is a private company in which the government has a controlling stake and which holds a monopoly over gas exports. On 5 February, Putin, who stands for presidential elections on 4 March, boasted that the return of state shareholder control over Gazprom as a victory of his years in power.

"Our Ukrainian partners took as much gas from the export pipeline as they felt necessary," Miller told Medvedev. He added that during the recent cold snap, Ukraine was taking gas at the annual pace of over 60 billion cubic metres (bcm).

Medvedev said Russia had different options for building South Stream, by giving it greater capacity or "stop at some middle point". But in view of the report made by Miller, he ordered that South Stream be built at its full capacity of 63 bcm.

"We will launch the construction in December. All the necessary instructions on gas pipeline design based on a 63 billion cubic metre capacity will be given without delay," Miller answered.

Ukraine denies wrongdoing

At the same time, the Ukrainian Mission to the EU sent around a statement, claiming that National Joint Stock Company Naftogaz Ukraine has not diverted a single cubic meter of natural gas transiting through its territory since the beginning of 2012.

In February 2012 Naftogaz informed Gazprom about possibility of supplying additional volumes of the resource to European consumers by extracting gas from the Ukrainian gas storages, the statement reads.

"Had the Russian side asked us, we would have helped the European consumers in the situation of a sharp drop in gas supply, the way we helped Turkey," Deputy Chairman of Board of Naftogaz Vadym Chuprun is quoted as saying.

The contradicting statements are reminiscent of verbal exchanges between Moscow and Kyiv over the 2009 gas crisis, which left a large part of Europe in the cold over a payment dispute.

Gas price talks between Ukraine and its former Soviet master have dragged on for more than a year without tangible result.

Previous disputes between Russia in Ukraine have briefly disrupted gas supplies to Europe, prompting both Gazprom and the European Union to look for alternative shipping routes such as the Nord Stream pipeline launched last year or the planned South Stream pipeline project. [more]

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