Pipeline Hardball: EU versus Russia

Bulgaria and Russia are seeking to soon resume the construction of the South Stream pipeline designed to ship natural gas via the Black Sea to the European Union to cut dependence on Ukraine for transit of the fuel.

Bulgaria, which mostly relies on Russian gas for its energy needs, halted the project last month after the EU’s executive arm sent a letter asking for work to be suspended because of concerns the Balkan country may have broken the bloc’s public procurement laws by favoring local and Russian bidders. Russia then said the 28-nation union was seeking to retaliate over its conflict with Ukraine.

Bulgaria and OAO Gazprom picked a consortium of Russian pipeline builder Stroytransgaz and Bulgaria’s Gasproekt Yug to build the pipe’s section, Russia’s state gas exporter said on May 27. Stroyntransgaz’s main shareholder is Gennady Timchenko, 2014 who’s been sanctioned by the U.S. over Russia’s role in the Ukraine crisis with visa bans and asset freezes.

The EU is also investigating whether the project breaches a so-called unbundling law that prevents gas providers from having control over pipelines.  The link, scheduled to start operations in 2015, is designed to deliver 63 billion cubic meters of natural gas a year. It would run as deep as 2,250 meters (7,400 feet) below the Black Sea surface, passing across Bulgaria, Serbia, Hungary and Slovenia before entering Italy, according to its website. The Bulgarian section will be 540 kilometers (335 miles) long and cost 3.5 billion euros ($4.8 billion), the government said in 2013.

The pipeline’s construction should continue after the EU concludes its probe of the project, Bulgarian President Rosen Plevneliev said in a Bloomberg TV interview on July 4, 2014. The government is working with the Commission in Brussels to iron out differences, Bulgarian Prime Minister Plamen Oresharski said in another interview on same day.

The project is financed by Gazprom and partners including Eni SpA, Electricite de France SA and Wintershall AG.

Russia, Bulgaria Seek Quick Resumption of South Stream, Bloomberg, July 7, 2014

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