EU struggles for unity as it pushes against Russia's South Stream

By bne IntelliNews April 22, 2014

bne -

As the EU looks to step up resistance to Russian plans to build a massive new gas pipeline plugging it into Southern Europe, Bulgaria is leading opposition among member states set to host the route.

In a vote on April 17, a majority of MEPs voted in favour of ending the South Stream project, as well as backing EU economic sanctions against Russia over its role in the crisis in Ukraine. MEPs "called for EU measures against Russian firms and their subsidiaries, especially in the energy sector, and Russia's EU assets, against a background of violence designed to destabilise the east and south of Ukraine," says a European parliament statement. "Parliament is gravely concerned about the fast-deteriorating situation and bloodshed in the east and south of Ukraine." 

MEPs voted separately on a text on the South Stream project, which is planned to bypass Ukraine's pipeline network to carry 63bn cubic metres of gas per year under the Black Sea and through Central and Southeast Europe. The approved text includes a statement that the parliament "takes the view that the South Stream pipeline should not be built, and that other sources of supply should be made available." 

Brussels has long been at odds with Moscow over its plan for a twin for the Nord Stream route that began delivering gas to Germany in 2012, as it pushes to diversify its gas supply, mainly by tapping producers in the Caucuses. The Ukraine crisis has only concentrated minds. A spokesperson for EU Energy Commissioner Gunther Oettinger told Russian newswire Itar-Tass on April 19 that South Stream is "not a priority" for the EU. 

Family fight

However, several EU member states have signed up to host the pipeline. The European parliament vote, which is non-binding, caused dismay in Sofia. Bulgarian Energy Minister Dragomir Stoynev said that the project should not be blocked for political reasons, and called on MEPs to consider the impact it could have on member states. "We will fight for the implementation of South Stream," Stoynev said. 

Russia has suggested its standoff with Kyiv could see the gas taps turned off. That threatens to cut off the likes of Bulgaria - which imports almost all of the gas it consumes from Gazprom, with supplies routed via Ukraine - for a third time in eight years. 

That patchy track record sees the 2,380km South Stream pipeline deemed of strategic importance to Bulgaria. The country does not yet have alternative connections to other countries in the region, although it may receive gas from Azerbaijan's Shah Deniz field via Greece after new pipelines come online in 2019.  

"South Stream is a long-term infrastructure project of strategic importance. Now they want to stop South Stream. How are we to develop? This crisis at the moment shows that we do not have security of natural gas supplies for Bulgaria," Stoynev said, according to Reuters. "Bulgaria is part of the European family, meaning that we must comply with European policies. But solidarity is one of the key principles on which the European Union was set up. The European Commission should take into account of the negative effects for each member state of its future actions."

Stoynev added that Sofia would observe Brussels' decision, but "we will fight for a financial mechanism for the countries that will suffer losses from these decisions." 

Leverage

Brussels has been knocking heads with Moscow over both Nord and South Stream for some years, but clearly sees the project as a point of leverage as it seeks to react to Russia's annexation of Crimea in March. The EU insists Gazprom must respect its regulations, which demand access to the route for third party suppliers, and said late last year that it would force participating members to redraw contracts with the company. 

The demand provokes anger and resistance in Russia. Energy Minister Alexander Novak insisted on April 18 that despite the European parliament's vote in favour of dropping South Stream, the project would still go ahead since it is already the subject of international agreements. "Russia continues realising the project in compliance with the intergovernmental agreements. The work cannot be suspended," he claimed.

The reaction of Bulgaria only emphasizes the leverage Russia enjoys in the eastern end of the EU thanks to its dominance of energy supplies. That complicates Brussels' efforts to put together a united front. 

Poland, for instance, is pushing for strong action. Prime Minister Donald Tusk called on April 21 for the EU to form an energy union to create a single entity that would buy Russian gas, preventing Moscow from picking off individual member states. By way of contrast, Slovakia continues to drag its feet on piping gas from the bloc to Ukraine in a bid to help it weather Russian pressure, saying it needs guarantees that its own supplies will not suffer.

"It cannot be ruled out that the threat of another gas crisis in relations between Russia, Ukraine and the EU will be used by Moscow as a pretext for a more assertive expression of its postulates (which it has put to Brussels over the last few months) to revise energy cooperation between the EU and Russia, the main component of which is an exemption from the application of EU regulations to cross-border projects (mainly South Stream and Nord Stream)," suggests  Szymon Kardas at The Centre for Eastern Studies.

 

 

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