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South Stream Pipeline May Not Be Dead Yet

South Stream Pipeline May Not Be Dead Yet

The European Commission's new energy chief says that Russia could revive the South Stream natural-gas pipeline project if it follows EU rules.

In an interview with RFE/RL on December 5, Maros Sefcovic said that the EU was willing to discuss the project to pump gas under the Black Sea to Europe, but that Russia must abide by EU energy rules and drop a complaint over the issue in the World Trade Organization (WTO).

Russian President Vladimir Putin abruptly announced on December 1 that Russia was abandoning South Stream and blamed the EU, saying European opposition to the project had forced the Kremlin's hand.

The EU rejects that accusation.

Sefcovic said that "we are ready to discuss the project with the Russian side. But of course I think the understanding should be clear: They have to withdraw the case from WTO and they should be ready to show the EU law would be applied in this project."

Related: Scrapping South Stream Underscores Russia’s Weakness

Brussels has insisted that state-controlled Russian gas exporter Gazprom abide by rules set out in the EU's "third energy package," which requires the separation of companies' generation and sale operations from their transmission networks -- something the South Stream project does not fulfill.

Russia has asked the WTO to review the EU energy rules, which Putin has called discriminatory.

Sefcovic suggested that was not the case.

"If you want to build such a pipeline and a project of this magnitude you have to respect EU rules, he said.” And you have to respect the rules which are followed by all energy companies in Europe. If any European company would like to build a pipeline in Russia it would be absolutely natural and we expect that they would respect Russian law."

South Stream would reduce Russia's reliance on Ukraine as a transit nation for its supplies to the EU, which gets about one-third of the gas it uses from Russia -- half of that via Ukraine.

Russia and the EU have been wrangling for years over the "third energy package" amid Western accusations that Moscow uses its energy riches as a geopolitical instrument.

Putin's announcement came after months of severely strained relations between Moscow and Brussels over the crisis in Ukraine.

Talks on South Stream's legality had been frozen after Russia annexed Crimea in March, and Moscow's support for separatists in an armed conflict that has killed thousands in eastern Ukraine has added to the tension.

Sefcovic said that the EU will now focus on boosting interconnectors between EU member states to reach energy-poor areas in the Baltic region and Southeastern Europe, and on helping finance the energy sector in Ukraine.

He said that compared to "building a new pipeline like the South Stream, through very complicated undersea routes," modernizing Ukraine's gas system would be "much more affordable and clearly that is one of the priorities of the EU -- how to help Ukraine to modernize the system."

He said Ukraine was "losing a lot of money" because of the low efficiency of its energy system.

"That is one of the priority area[s] where Europe wants to help with expertise, with advice, with best practices but also financing these reforms," Sefcovic said.

A major task for Sefcovic in his new role will be to help Moscow and Kyiv forge a new deal for Russian supplies of gas to Ukraine and transit across Ukraine to Europe.

Russia stopped delivering gas for Ukrainian consumption in June, citing Ukrainian debt for previous supplies and demanding prepayments for further deliveries.

Related: How Energy Secure Are The EU And UK?

Under Sefkovic's predecessor, Ukraine, Russia, and the EU signed a "winter package" deal on October 30 that was designed to ensure that Ukraine makes some payments for gas to Russia and that Russia keeps gas flowing through the winter.

Ukrainian Energy Minister Volodymyr Demchyshyn said on December 5 that Kyiv was in the process of making a $378 million prepayment for Russian natural-gas deliveries and that the funds would be transferred by the end of the day.

The prepayment is for delivery of 1 billion cubic meters of gas to Ukraine during the month of December.

The agreement reached on October 30 is only valid through March, making it necessary for a so-called "summer package" to be negotiated.

"I hope can we can go over this winter without some kind of super-dramatic scenarios," Sefcovic said.

He said it was "quite clear, especially in my meetings with the Ukrainian President [Petro] Poroshenko and Ukrainian Prime Minister [Arseniy] Yatsenyuk that we have to think very hard already in January, February and look into the ways how we can discuss the relationship in this area for the post-March period."

"I think we will do our best to again play the role of honest broker, of moderator, to make sure that I would say the same atmosphere and constructive deal is found also for the post-March period."

By Rikard Jozwiak

Source - www.rferl.org  

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