15th Dec 2019

Russia lobbies EU for special treatment on pipeline

  • The final South Stream route is still unclear (Photo: GPlus)

Russian energy officials are lobbying the EU to grant the Gazprom-led South Stream exemptions from EU competition and gas market rules. Energy commissioner Gunther Oettinger says the rival, EU-backed Nabucco project remains a priority, but has indicated that some concessions are possible.

In an afternoon-long PR event at a Brussels hotel on Wednesday (25 May), the CEO of Gazprom, Alexei Miller, Russian energy minister Sergei Shmatko and the head of the South Stream project, Marcel Kramer made the case for the EU to throw its weight behind the pipeline, set to run through the Black Sea and to offer an alternative route to the Ukrainian gas network.

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The final route, pending investment deicisons in 2012 and questions over Bulgaria's commitment, could still change. But in theory, the pipe is to go on the southern seabed of the Black Sea, then on land either through Romania or Bulgaria to Serbia and then branch off to Hungary, Slovenia and Croatia.

Despite claims that the €15.5 billion project is "purely commercial" and has no need for state subsidies, the line between government politics and gas selling interests is blurred, with Moscow seeking an "EU-Russia regulatory framework which encourages this investment," as Kramer put it.

Kramer explained that new rules for energy companies on the EU market - forcing the separation of production and transport assets - should be "softened" when it comes to strategic-level enterprises.

Energy minister Shmatko even alluded to potential gas disruptions if Gazprom and its associated EU companies are "deterred from initiating" the project or "face restrictions over the returns they can expect on their investments."

Speaking at the same event, EU energy commissioner Guenther Oettinger said the EU remains committed to the "southern corridor" - several gas pipeline projects including Nabucco which would grant the EU direct access to Caspian gas reserves.

If South Stream is built, Caspian gas would be bought up by Gazprom and shipped via Russia through the Black Sea pipeline, undermining the rationale of the Southern Corridor. It would also have an impact on Ukraine's economy and politics, as the country would see less gas transiting from Russia to Europe.

"We support some projects more than others, that is clear. In this regard, I reaffirm again what I have said many times before: the EU wants direct contacts with Caspian producers through new supply routes and pipelines," Oettinger said.

On South Stream, he said that "it is not our top priority" and pledged not to impose any "unreasonable" regulatory requirements. "We will act as fair partners," he pledged.

On the other hand, the German commissioner indicated that if "gas independents active in Russia" were allowed to have access to South Stream, then the project would "deliver on two essential criteria: namely diversification of routes and counterparties."

"That means a stronger contribution to European diversification efforts," Oettinger suggested.

As for EU internal market rules, he did not encourage any hopes that there will be exemptions for the project. When on EU territory, be it Bulgaria or Romania, South Stream would "normally have to allow all shippers to book, within the EU, capacity on the pipeline at non-discriminatory conditions", he said.

Also, tariffs charged to shippers will "normally be subject to regulation by the national regulators in the countries concerned." And thirdly, the Russian-owned pipeline would have to allow for reverse flows in case of disruptions.

"I understand that certain EU member states entered into bilateral agreements with the Russian Federation which may partially contradict these principles," Oettinger added. In case this turns out to be true, member states will still have to apply EU market rules and change the respective agreements so as to reflect that," he warned.


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