The Energy Community, a European Union policy group, said Russian gas exporter OAO Gazprom should strike a deal with the bloc on its planned South Stream pipeline to avoid wasting money on a project that falls foul of EU law.
Russia’s agreements to build South Stream with countries including Austria, Greece, Hungary and Serbia are unlawful, Dirk Buschle, deputy director of the Vienna-based group, said in the Serbian capital Belgrade. A compromise is possible, he said.
Gazprom in December vowed to continue construction of its South Stream pipe to Europe, saying EU legal concerns could be clarified as the project moved ahead. The bloc’s regulatory arm called on member states to renegotiate their intergovernmental deals with Russia on the venture, saying the accords breached EU law on pipeline management, third-party access and pricing.
The agreements between Russia and EU members give Gazprom “100 percent control,” violating the bloc’s free-market rules, Buschle said yesterday in an interview. South Stream was declared illegal by the EU last year.
Russia has said the $20 billion project to send gas to central Europe across the Black Sea and the Balkans would improve EU energy security as the pipe would bypass Ukraine, where price disputes have disrupted exports in recent years.
A compromise similar to the EU’s deal over the Trans- Adriatic Pipeline is achievable, Buschle said. That project, known as TAP, struck an agreement in May to negotiate long-term ship-or-pay contracts with exporters of Azeri gas.
It’s possible to balance public and investor interests, Buschle said. “It’s been done with TAP.”
Ukraine, embroiled in a political crisis that’s seen deadly clashes between police and protesters this week, has in the past defended its position as the main transit route for Siberian gas, calling South Stream plans “wasteful and unnecessary.”
Ukraine is a member of the Energy Community, which was set up in 2006 to help liberalize energy markets and enact EU legislation related to gas, power and the environment.
“One of the guiding reasons for Ukraine to join the Energy Community was to get rid of South Stream, considered as a vital threat to their interests,” Buschle said. [Bloomberg]