Russia, Turkey reach South Stream deal

Dec. 30, 2011 at 6:29 AM
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MOSCOW, Dec. 30 (UPI) -- Turkey this week gave a boost to plans by Russia's Gazprom by issuing permits for its South Stream natural gas pipeline to be built under Turkish territorial waters.

The permits were personally delivered Wednesday to Russian Prime Minister Vladimir Putin by Turkish Energy Minister Taner Yildiz in a Moscow ceremony, marking what the Russian leader called a "a big event in Europe's energy sphere."

Russia is seeking to bypass Ukraine in delivering gas supplies to Europe via two new pipelines -- Nord Stream, from Russia to Germany via the Baltic Sea; and South Stream, which would run under Turkey's Black Sea waters from Russia to Bulgaria.

Nord Stream's first branch opened in November and this week's agreement with Turkey is "a serious acknowledgement of the fact that the project would be executed fully on schedule" by the end of 2015, Gazprom Chief Executive Alexei Miller said.

His remarks could be an indication Russia intends to proceed with the South Stream route even if it can iron out its dispute on transit pricing with Ukraine, the Financial Times reported.

"I would like to express special gratitude to our Turkish friends for the constructive efforts and understanding, especially for prompt examination of all issues during the last days of the outgoing year," Miller added. "I would like to congratulate all the South Stream project participants and our partners on obtaining the construction permit. It is a very nice present for the New Year."

Gazprom has a 50 percent stake in the South Stream project. Italy's Eni SpA owns 20 percent, while France's EDF and Wintershall of Germany each hold a 15 percent stake.

Putin said the agreement was the result of a give-and-take process among the parties, while Miller told the Russian news agency RIA Novosti that a boost in gas supplies to Turkey was also part of the agreement.

The Russian utility's two long-term contracts with Turkey were extended to 2021 and 2025 while gas supplies will be boosted by about 8 percent, or 2 billion cubic meters, in the coming year, up from 25.5 billion cubic meters in 2011.

Miller said this week the construction of South Stream is dependent on the status of negotiations with Ukraine, through which Europe gets about 20 percent of its natural gas from Russia.

Kiev is pressing for a better gas deal from Russia, though Gazprom said it's unlikely any breakthroughs would develop before year's end.

"South Stream was always tied to Ukraine," Miller said.

The combined capacity of Nord Stream and South Stream is equal to the amount of gas that Gazprom transports through Ukraine, Interfax reported.

The South Stream deal was also seen as another blow to the prospects of what many analysts consider to be its main competition -- the European Union-backed Nabucco project, which seeks to transport natural gas from the Caspian Sea via Azerbaijan, Georgia and Turkey to Europe.

The European Commission, however, reiterated its support for the Nabucco route Tuesday, the Financial Times said.

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