• South Stream would 'undermine Europe’s energy security' an EU official said (Photo: www.nord-stream.com)

EU commission scales up rhetoric against Russian gas pipeline

03.06.14 @ 10:05

  1. By Andrew Rettman
  2. Andrew email

BRUSSELS - The European Commission has indicated it will obstruct the building of a new Russia-EU gas pipeline to bypass Ukraine.

Its energy chief, German Gunther Oettinger, told the Frankfurt Allgemeine Sonntagszeitung over the weekend that its objections to the South Stream project are both political and legal.

“With civil war-like conditions in eastern Ukraine and without Moscow's recognition of the Kiev government, we will certainly not arrive at a political conclusion of our negotiations,” he said.

He added that talks in a special EU-Russia “working group” on South Stream can continue, but only if Russia is “ready for constructive co-operation on the basis of our energy law”.

An EU official told EUobserver on Tuesday that the pipeline would bypass Ukraine’s transit system and make it easier for Russia to cut off Ukraine’s gas without harming EU customers.

“We see Ukraine as EU energy partners, so to support South Stream would amount to a lack of solidarity with Ukraine.”

The contact added that talks in the working group have “stagnated”, in part because Russia has attacked EU energy laws in the World Trade Organisation instead of seeking a bilateral accord.

The EU’s so-called third energy package forces energy firms to separate production and distribution assets and to allow competitors access to infrastructure.

But Russia’s Gazprom wants to maintain full control over the pipeline, which is to deliver 63 billion cubic metres of gas a year via the Black Sea to Italy and Slovenia.

Russia has already signed intergovernmental agreements with Austria, Bulgaria, Croatia, Greece, Hungary, and Slovenia. The Gazprom-led consortium, which aims to start construction this year, also includes EU firms EDF, Eni, and Wintershall.

The comission cannot force member states to abandon the project, but it can obstruct progress by launching legal cases against the contracts which underpin its future. It already threw one spanner in the works this week by launching “infringement proceedings” against Bulgaria on alleged non-compliance with EU public procurement law in its handling of tenders.

The South Stream dispute comes amid EU efforts to defuse a gas crisis between Russia and Ukraine.

Oettinger on Monday chaired a meeting in Brussels with the two countries’ energy ministers after Russia threatened to cut off Ukraine’s gas the same day if it did not pay debts based on an inflated price agreed in 2009.

The interim deal saw Ukraine pay €570 million worth of the debt and to hold off on a lawsuit in a Stockholm arbitration court in return for a one-week extension of Gazprom’s deadline.

Oettinger announcned that the CEOs of Gazprom and Ukraine’s state gas distribution firm, Naftogaz, will hold further talks, but that, in the meantime: “there will be no interruption of delivery … [and] there will be no [Ukrainian] prepayment for gas deliveries for June.”

He said the two sides will seek a “package-type solution” which is “considered fair by both sides”.

He added that his aim is for an accord which “would ensure security of supply for at least a year” and to make sure that both Ukraine and its EU transit customers would be able to make it through “in case of a long and cold winter”.

The gas talks come amid a flare-up in fighting in east Ukraine.

Clashes between Ukranian forces and Russia-backed rebels claimed at least 12 more casualties near Luhansk on Monday.

Russia the same day submitted a resolution on the conflict to the UN Security Council, but Western ambassadors said they could not back it because it made no reference to Ukraine’s territorial integrity.

The Ukraine crisis is to take centre stage in talks between US President Barack Obama and European leaders on his visits to Brussels, Warsaw, and France this week.

Nato countries’ defence ministers will this week also discuss stationing more military assets in eastern Europe to reassure ex-Iron Curtain states.

But Russia’s ambassador to Nato, Alexander Grushko, told Russia’s Interfax news agency that if it does, then Russia will consider scrapping the 1997 Nato-Russia Founding Act, a treaty which limits troop and missile deployment in the region.

"We shall wait and see what the [Nato] ministers decide," he said.

"But if it means additional deployment of substantial Nato military assets in central and eastern Europe, and we are hearing calls for just that, then even if it takes place as a troop rotation we will have difficulty viewing it as anything other than a direct breach of obligations in the fundamental Russia-Nato documents,” he added.

"This could cast Europe back to the days of the Cold War and launch an arms race."