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South Stream in Serbia: A hasty decision

A symbolic pipe prepared for the ceremony kicking off construction of the South Stream gas pipeline near the village of Sajkas, November 24, 2013
A triumphant forecast by the manager of Russian Gazprom appears destined to become an empty promise.

Alexey Miller announced in mid-2012 that the first batches of gas through Russia’s ‘South Stream’ pipeline would be delivered to the Balkans and southern Europe by the end of 2015.

Now, though, the pipeline has been blocked by the European Union. The first country to pay a price for South Stream could be Bulgaria, and if Serbia does not change its agreement with Russian giant Gazprom, it might also face severe sanctions.

The European Commission already had requested that its member countries deliver information on work on the pipeline in the Black Sea, which is the first step in filing a complaint before the European Court in Strasbourg, according to Sabine Berger, a spokesperson for the European Commissioner for Energy. If the court rules in favor of the European Commission, Bulgaria would have to halt the project or face fines.

Issues regarding the tender notices are problematic in the construction of the Bulgarian arm of South Stream. As Berger explained, Bulgaria did not publish the tender notice, as it is required to do, and then showed favoritism to Russian and Bulgarian applicants.

Janez Kopac, Director of the Energy Community Secretariat, told RFE that the agreement between Bulgaria and the Russian Federation violates the so-called Third Energy Package of European energy regulations. The package requires all EU member countries, including Bulgaria, to allow so-called “‘third party access” in all gas and energy projects.

That means that transit or energy infrastructure for transportation of larger amounts of gas or electricity must be available to everyone, explains Kopac. And that is where Bulgaria faces problems.

Kopac said: “The Bulgarian trans-national agreement envisages that the pipeline would be mostly managed by Gazprom, who would also influence prices of gas transit through Bulgaria. That is why the agreement should be modified by Bulgaria, which is something the Russian Federation does not want, and even Bulgaria is unwilling to do. That is something we have known for a long time. We have been talking about it for years and it was expected the European Commission would start these proceedings sooner or later. Those issues should have been dealt with before the construction started, but it was delayed, and now, probably in the context of the Russian-Ukrainian crisis and new Russian-European relations, the Commission finally made the move that has been expected for years, as I said.”

South Stream may yet be built, but it will never become functional if bilateral agreements between Russia and EU member countries are not amended, Kopac explained.

It is clear that without the South Stream gas pipeline through Bulgaria, there will be no pipeline in Serbia. And Kopac warns of additional consequences for Serbia if the country does not amend its bilateral agreement on South Stream with Russia:

“As European Energy Community Secretariat, we warned Serbia as early as 2010, that the agreement with Russia is not in accordance with the legal framework of the Energy Community, which is similar to the legal framework of the European Union. But Serbia did not pay any attention to that discrepancy. I must say that, as far as I know, one of the conditions that the EU agreed upon for starting accession negotiations with Serbia is to amend all bilateral agreements that are not in accordance with the European legal framework, namely this one on the South Stream. In that context, as things stand, Serbia cannot formally enter the European Union if it does not amend that agreement.”

Meanwhile, Serbia keeps insisting that the European Union should resolve its problems regarding South Stream with Russia and its member states. However, Sijka Pistolova, editor-in-chief of the ‘EnergyObserver’ website, commented on the issue for RFE:

“The problem is being swept under the rug. The European Union clearly stated that certain measures will be taken against EU member countries that signed an agreement on South Stream construction [without adhering to EU mandates]. If Serbia supports such behavior, it will also face penalties.”

Since the gas crisis four years ago, the European Union increased its efforts to diversify its gas supply in order to decrease its dependence on Russia. That is how the decision to open the ‘South Gas Corridor’ was made, because it will connect the European gas market with the biggest gas reserves in the world in the Caspian Sea and Middle East basins.

The European Commission gave its support to a proposed gas line that would deliver gas supplies from Azerbaijan. The gas field that feeds that line is in Shah Deniz, and its managing consortium chose the Trans-Adriatic Pipeline (TAP) for gas delivered to the Turkish border, through Greece and to Italy. This pipeline is supported by Montenegro and Kosovo, who both stand to benefit.

There are also plans for the construction of a Trans-Anatolian (TANAP) pipeline in Turkey, and that gas infrastructure will directly connect the Caspian Sea with Europe, according to Pistolova.

She stresses that because of these pipelines Russia will no longer be able to use gas to blackmail and create conflict between the EU members. Dependence on Russian gas is not great enough to force the European Union to accept all Russian conditions. She says:

“There is a lot of gas in the European Union and the world, and that means that Russia is not in a position to threaten the European Union or anyone else at the moment.”