South Stream fell to political crises and tough Brussels stance

Dec. 24, 2014 - PRLog -- International energy community, politicians and experts continue the debate over the reasons and possible consequences of the decision to shut down the South Stream gas pipeline. The project cancelled by the President of Russia Vladimir Putin was to supply up to 63 billion cubic meters of gas to Southern and Central Europe through a Black Sea route with the aim to diversify export routes and eliminate transit risks.

In his speech after talks with his Turkish colleague Recep Tayyip Erdogan on December 1, the Russian President made it clear that if Europe does not want South Stream to be built, it will not be built.

“We will redirect the flow of our energy resources to other regions of the world, including by advanced and fast realization of liquefied natural gas projects. We will advance to the other markets,” Vladimir Putin described, adding that special emphasis will be placed on expanding gas supply to Turkey at more favorable prices.

Meanwhile, Alexey Miller, head of “Gazprom,” noted that the decision to cancel South Stream marked the beginning of drastic changes in originally buyer-oriented supply policy to European countries. According to him, in the future Europe will be able to buy Russian gas through a transit hub on Turkish-Greek border.

The speech given by the Russian President was a very unexpected hit for several European countries that planned to profit from South Stream, Bulgaria and Serbia first and foremost. Western politicians voiced an opinion the decision to stop the South Stream construction was an attempt to coerce Europe into submission, and a sign that sanctions proved to be effective. Several political figures believe this step to be a bluff, and the project possible to restart.

The event caused mixed reaction in foreign media. Several European sources, such as BBC, German “Frankfurter Allgemeine Zeitung” and Italian “La Repubblica,” called the South Stream halt a “defeat for Putin” and said it was caused by altered energy market.

However, some sources mention great losses for Southern and Eastern European countries. According to OilPrice.com, the decision to cancel the pipeline puts those states at great disadvantage in comparison to their bigger and stronger neighbors.

“Countries like Bulgaria and Serbia remember well the winter of 2009, when achingly cold temperatures coincided with Russia’s punitive shutoff of gas to Ukraine. Germany used the lesson to press forward with the Nord Stream pipeline, guaranteeing a direct gas supply. But the EU has repeatedly blocked its southern counterpart, citing antimonopoly policies but possibly fearing even greater Russian influence within the bloc. The South Stream countries not only lose energy guarantees, they lose lucrative transit fees, new jobs, and the potential for better trade with Russia,” they stress, pointing out that discontent caused by this decision may further contribute to political instability inside the EU.

“Reuters” says Europe has not too many possibilities to diversify their gas suppliers: among potential alternatives are resuming construction of the Nabucco pipeline through the Caspian Sea, building a liquefied natural gas terminal in Croatia, and increasing import from Azerbaijan.

At the same time, several analysts claim that Vladimir Putin’s decision to cancel South Stream is an attempt to show the West he will not submit, even in tough economic, trade and political circumstances.

“By abandoning this project, Putin has sent a message that he has had enough of Europe’s continued complaints and critiques about its role in Ukraine. […] With these actions, Putin is attempting to stay ahead of his adversaries, though his country is increasingly being backed into a tough corner,” suggests Tim Boersma of Brookings Institution.

International experts had mixed opinions over the role of Bulgaria in the South Stream issue. One of them, Kiril Avramov, faculty member of the Center for Social Practices at the New Bulgarian University, said the decisions made by authorities as

“You should understand that it is not ill will of the European countries to severe ties with Russia. It was only the requirement for Russia to comply with international law,” he added.

According to him, the issue was further exacerbated by the fact that talks between Sofia and Moscow were not sufficiently transparent.

The expert also highlighted the fact that several high-ranking officials do not always agree to the course taken Boyko Borisov. In particular, according to him, Kristian Vigenin, the foreign minister of Bulgaria, expressed his disagreement with the former’s decisions.

“He was giving an official lecture at our university. Part of the questions that were given to him were precisely about South Stream,” Kiril Avramov explained.

At the same time, the analyst struggled to evaluate possible losses from the decision because of lack of transparency during the talks and difficult economic situation in Russia. However, he expressed his belief that both parties see the situation as unacceptable and inconvenient.

In his turn, Mark Harrison, Professor of Economics at the University of Warwick, England, call the decision to stop South Stream an unusual decision for Kremlin, because it might have been made on economic grounds.

“For several years the Russian administration has given political objectives priority over financial considerations in the energy market,” he explained.

In the expert’s opinion, the EU obstructed the pipeline construction mainly due to demands from Brussels to follow its competition laws.

“The European objections arose because European competition rules do not allow the same corporation to control both the gas and the pipeline,” Mark Harrison said.

From his point of view, several Bulgarian politicians were trapped because of the stance taken by Brussels and the decision to abandon the project made by Moscow.

“They tried to satisfy Russia’s aims for South Stream and then found themselves isolated by the Russian withdrawal,” stressed the Professor of Economics at the University of Warwick.

According to Andras Deak, senior fellow at the Institute of World Economies of the Hungarian Academy of Sciences, the current situation made it impossible for affected countries to influence the decision on their own.

Full text news agency "PenzaNews":http://penzanews.ru/en/opinion/57122-2014