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Bulgaria is ready to issue all the necessary permits for the construction of the South Stream pipeline, according to Prime Minister Boyko Borisov. He said it will up to Gazprom whether the pipeline is built or not.

south-stream-billion-losses.si

European companies involved in construction of South Stream will suffer direct losses of at least €2.5 billion after Russia canceled the project, says a South Stream Transport press release.

The total amount of losses of foreign companies is estimated at €2.82 billion, an official paper said Tuesday.

 
Reuters/Sergei Karpukhin

Reuters/Sergei Karpukhin

 

Russia has canceled a 63 billion cubic meter pipeline project to deliver gas to southern Europe. Instead of going through Bulgaria, an EU member, it will flow through Turkey and Greece. RT walks you through some questions you may have about the decision.

READ MORE: Putin: Russia forced to withdraw from S. Stream project due to EU stance

What is South Stream?

A gas pipeline that would have delivered 63 billion cubic meters (bcm) to southern Europe from Russia through the Black Sea, traversing across Bulgaria and then onto Serbia, Hungary, Slovenia, Italy, Serbia, Bosnia and Herzegovina, Croatia, and Austria. South Stream had the potential to meet 20 percent of EU gas demand.

What will now be built instead?

Gazprom has officially confirmed that Russia will construct an alternative pipeline using funds and materials intended for the original South Stream project.

The Russian gas giant still plans to build a major gas pipeline to Turkey and southern Europe, but it won’t be called “South Stream” and it won’t cross through Bulgaria.

Gazprom CEO Aleksey Miller said Monday that the new pipeline will cross the Black Sea and deliver 14 bcm to Turkey, then move on and deliver another 50 bcm to a hub at the Turkish-Greek border. Miller told reporters in Ankara that Gazprom had signed a memorandum with Turkey’s Botas Petroleum Pipeline Corporation to seal the deal.

The gas will leave Russia from the Black Sea port of Anapa in the Krasnodar region, from the Russkaya compressor station, the same facility that was supposed to be used for South Stream.

What was wrong with the original plan?

Russia doesn’t want to start a pipeline that the EU doesn’t want to see completed. The EU signaled that the project might not be realized, and as the Ukraine crisis intensified, so did opposition to the Russian pipeline on European soil.

EU Energy Minster Gunther Oettinger openly threatened to obstruct work on the South Stream pipeline as long as Moscow didn’t recognize the new government in Kiev.

Over the summer Bulgaria, under pressure from the United States and the EU, halted the South Stream project twice, which worried Moscow. Bulgaria was to be the key gateway to Europe for South Stream gas.

Gazprom and EU countries signed bilateral South Stream agreements as far back as 2008. Later, the European Commission passed legislation known as the “Third Energy Package,” which stipulates that a single company can’t both produce and transport oil and gas.

Does this mean less gas to Europe?

No. Russia has other pipelines that deliver gas to Europe such as the Nord Stream and Yamal pipelines. Russia will deliver 155 bcm to Europe in 2014, half of which will flow through Ukraine, and the rest through Nord Stream, Yamal and other, smaller pipelines.

But the point of South Stream was to deliver gas directly to the EU and to bypass Ukraine, which has been constantly engaged in gas rows with Russia.

Germany, France, and Italy have a say in the project, as they are strategic partners in South Stream. Gazprom may also decide to find new partners or go it alone with the new venture. South Stream AG was the company created to build and manage the project, which is 50 percent owned by Gazprom, 20 percent by Italy’s ENI, and 15 percent each by France’s EDF and Germany’s Wintershall.

How is Europe affected?

It’s bad news for EU companies that have already invested at least €2.5 billion in the South Stream project.

Losing South Stream could also mean less energy security. Even though Europe is increasingrenewable energy, it still relies on Russia for a third of its gas supplies, half of which travels via Ukraine.

Even prior to the Ukraine crisis, European countries have been focused on cutting their dependence on Russian energy, which they reaffirmed after Crimea rejoined Russia.

Europe can’t totally do without Russia gas, according to Jerome Ferrier, head of the International Gas Union and Senior Vice President of France’s Total.

Putin and Erdogan in 2005 at the opening of the Blue Stream pipeline. Blue Stream currently has a capacity of 16 bcm per year, and on Monday, the two countries agreed to increase it to 19 bcm. (RIA Novosti/Sergey Zhukov)

Putin and Erdogan in 2005 at the opening of the Blue Stream pipeline. Blue Stream currently has a capacity of 16 bcm per year, and on Monday, the two countries agreed to increase it to 19 bcm. (RIA Novosti/Sergey Zhukov)

Why Turkey?

Turkey is Gazprom’s second-biggest customer in the region after Germany. Their natural gas partnership dates back to 1984, when they signed their first supply cooperation agreement.

At present, Russia sends gas to Turkey through the Blue Stream gas pipeline, opened in 2002, and via the “Balkan corridor” through Ukraine, Moldova, Romania and Bulgaria. In 2013, Russia supplied Turkey with 26.2 bcm, nearly 60 percent of the country’s total needs. In 2014, Russia will supply Turkey with 30 bcm of gas.

With a population of more than 80 million people, Turkey is a strategic partner for Russia as it diversifies dependence away from Europe. Turkey’s imports from Russia are about 10 percent of Europe’s total demand.

Trade between the two countries currently stands at $32.7 billion, making Turkey an important foreign partner for Russia.

During President Putin’s visit to Ankara on December 1 with Turkish President Erdogan, Turkey sought a 15 percent discount for Russian gas, but only got 6 percent, starting January 1 2015. In the deal, there is the possibility to reduce prices in the future.

Is Russia turning away from the EU?

No. In fact, an EU pipeline project could still be realized, just not in the current political situation. For now, however, Moscow’s money is going to Ankara, not Brussels, an important geopolitical step for both nations who feel they have been strung along with lofty EU promises.

So far, Gazprom has spent $4.66 billion on the South Stream project, which was projected to cost $29 billion, according to the most recent estimate by the company.

Putin has said that Europe is still important for Russia, but that China is a priority. Turning to Turkey is another way to diversify buyers.

December 03, 2014 

http://rt.com/business/211023-eu-south-stream-putin/

 

 
Russian President Vladimir Putin (L) and President of Turkey Recep Tayyip Erdogan during a meeting in the Presidential Palace in Ankara December 1, 2014. (RIA Novosti / Michael Klimentyev)

Russian President Vladimir Putin (L) and President of Turkey Recep Tayyip Erdogan during a meeting in the Presidential Palace in Ankara December 1, 2014. (RIA Novosti / Michael Klimentyev)

 
Russia is forced to withdraw from the South Stream project due to the EU’s unwillingness to support the pipeline, and gas flows will be redirected to other customers, Vladimir Putin said after talks with his Turkish counterpart, Recep Tayyip Erdogan.

"We believe that the stance of the European Commission was counterproductive. In fact, the European Commission not only provided no help in implementation of [the South Stream pipeline], but, as we see, obstacles were created to its implementation. Well, if Europe doesn’t want it implemented, it won’t be implemented,” the Russian president said.

 

According to Putin, the Russian gas “will be retargeted to other regions of the world, which will be achieved, among other things, through the promotion and accelerated implementation of projects involving liquefied natural gas.”

“We’ll be promoting other markets and Europe won’t receive those volumes, at least not from Russia. We believe that it doesn’t meet the economic interests of Europe and it harms our cooperation. But such is the choice of our European friends,” he said.

The South Stream project is at the stage when “the construction of the pipeline system in the Black Sea must begin,” but Russia still hasn’t received an approval for the project from Bulgaria, the Russian president said.

Investing hundreds of millions of dollars into the pipeline, which would have to stop when it reaches Bulgarian waters, is “just absurd, I hope everybody understands that,” he said.

December 1, 2014. Russian President Vladimir Putin at the concluding news conference in Ankara. (RIA Novosti/Michael Klimentyev)

December 1, 2014. Russian President Vladimir Putin at the concluding news conference in Ankara. (RIA Novosti/Michael Klimentyev)

Putin believes that Bulgaria “isn’t acting like an independent state” by delaying the South Stream project, which would be profitable for the country.

He advised the Bulgarian leadership “to demand loss of profit damages from the European Commission”as the country could have been receiving around 400 million euros annually through gas transit.

The South Stream was intended to transport Russian gas through the Black Sea to Bulgaria – and through Serbia, Hungary, and Slovenia, further to Austria.

Russian gas giant Gazprom began construction of the onshore facilities for the pipeline back in 2012.

But the €23.5 billion project ran into difficulties, as it violated European Union regulations which state that the same company cannot both own the pipeline and the gas which is transported through it.

The crisis in Ukraine has turned the legal debate over the pipeline into a political issue, affecting the EU’s willingness to find a solution to the deadlock.

The EU Commission has been pressuring member states to withdraw from the project, with the new Bulgarian government saying it will not allow Gazprom to lay the pipeline without permission from Brussels.

Putin said that Russia is ready to build a new pipeline to meet Turkey’s growing gas demand, which may include a special hub on the Turkish-Greek border for customers in southern Europe.

For now, the supply of Russian gas to Turkey will be raised by 3 billion cubic meters via the already operating Blue Stream pipeline, he said. Last year, 13.7 bcm of gas were supplied to Turkeyvia Blue Stream, according to Reuters.

Moscow will also reduce the gas price for Turkish customers by 6 percent from January 1, 2015, Putin said.

“We are ready to further reduce gas prices along with the implementation of our joint large-scale projects," he added.

Russia, Turkey don’t want chaos in Syria

The Russian president has said that Turkey is an important participant of the peace process in Syria, outlining the many similarities that Moscow and Ankrara have regarding the issue.

"We share a common opinion that the situation in Syria can’t be considered adequate, we share a common opinion that we don’t want to allow chaos in the region and the strengthening of terrorist organizations like it happened in Iraq," he said.

According to Putin, it is important to create the conditions under which all citizens of Syria will feel safe and have equal access to governance.

“We certainly need to find an acceptable solution – first of all, acceptable for the Syrian people and all political forces in the country. And, definitely, we’re going to stay in contact with all participants in this process, including our friends in Turkey,” he stressed.

Members of al Qaeda's Nusra Front carry their weapons as they walk near al-Zahra village, north of Aleppo city, November 25, 2014. (Reuters/Hosam Katan)

Members of al Qaeda's Nusra Front carry their weapons as they walk near al-Zahra village, north of Aleppo city, November 25, 2014. (Reuters/Hosam Katan)

However, the sides still disagree on the future of Syrian President Bashar Assad, which Ankara wants removed from power.

"We sincerely expressed our attitude towards this [Assad's] regime. Mr. President has another stance on the issue. But in general, we have reached a certain agreement on [the] resolution of the Syrian conflict,”Turkish President Recep Tayyip Erdogan said.

“The only thing that we were unable to agree on is the way to resolve the crisis," he added.

A civil war between Syria's government forces and the Islamist opposition has been raging in Syria since 2011, taking over 200,000 lives, according to UN estimates.

December 01, 2014

 

http://rt.com/business/210483-putin-russia-gas-turkey/

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