Gazprom Promotes the “South Stream” Intensively

By Mikhail Agadzanyan

The visit of the Russian President in Bulgaria, which was planned on the first decade this month, has been postponed. Nevertheless, it is expected that Vladimir Putin shall visit Sofia right after Turkey. Yet instead of the Head of Russian State Bulgaria shall be visited by “Gazprom” Chairman Alexey Miller who shall proceed with signing of the series of final investment treaties with East European partners of Russia on the “South Stream”.


Last month “Gazprom” representatives finished final investment treaties on the gas project with Serbia and Hungary. By this, within the relations with Hungary Russian gas monopolist has managed to fix assignment by Budapest the status of the project of national importance to the “South Stream” gas pipeline at Hungarian territory. Serbia has become the first country to accept final investment decision on the project. And it’s clear: on November 21st 2011 within the territory of Serbia they commissioned the first unit of the project – underground gas storage “Banatski Dvor”.


Active “gas” diplomacy of Moscow has given its fruits this autumn not only as conclusion of the series of final investment treaties, but also in connection with the regrets sounded by neighboring partners on the project. Those were expressed by Croatia, having recognized at the top level (the President Ivo Josipović) underestimation of the good, which could have been done to the country by piping the line of the “South Stream” through its territory. At the current stage Croatia is only left to be satisfied with the plans to have only a branch line of the pipeline instead of the main line within its territory. But evidently Croats at some stage waited too long. Russia has decided not to leave Croatia to face its regrets all alone, and made a decision to create a bilateral working group on accomplishment of the “South Stream” project in the part of the pipeline for Croatian consumers.


Favorable East European political environment in the issue of accelerating project’s fulfillment dictates Russia enhancement of active diplomacy resources. In the essence, on way of defining finally the accomplishment of the project for Moscow two “bastion” has left. To be more precise, one and a half as “Gazprom” should have no troubles with Bulgaria. And then Turkey is left with its reactively unpredictable foreign political course, negative revelations of which Russia has started to feel more often recently.


Bulgarian government has refused of the practice of past years, when within his relations with Russian gas monopolist “insuperable difficulties” occurred from time to time. Mr. Miller often visits Sofia. And he is the only one from the leaders of Gazprom to know so well the nuances of Bulgarian political elite minds.


There was a period, in the beginning of 2009, when Sofia went on principle, and declared about its wishes to get absolutely new cooperation offers in gas sphere. Russian-Bulgarian relations in gas cooperation then became smooth and without confrontation, which allowed eventually to find mutually acceptable decisions on the ”South Stream”. Bulgarians should be paid tribute. At a definite stage they managed to define their “special line” and by this that the share of Russia in natural gas import of their country comprises 100%.


Everything has not been and shall not be that easy as we may suggest. Last days last year (December 28th, 2011) Ankara gave consent to Moscow for construction and operation of the gas pipeline “South Stream” in its exclusive economic zone in the Black Sea. Although it was preceded by Turkish demarches on unilateral reduction of Russian “blue fuel” purchase scopes and insistent wishes to reduce gas price, Moscow and Ankara fixed some compromise. Turkey reduced Russian gas import scopes and gained a discount, having granted its license on piping of the “South Stream” on its Black Sea part. But Turkey would not be Turkey, if clarity within relations with it would be set once and for all. Or, if not forever, then at least for a relatively long-term prospect.


Now within Russian-Turkish relations there is more indefiniteness, than adjusted clarity on further prospects of cooperation. Syrian conflict played its part, but resulted into such unwished incidents within bilateral relations as forced landing of Turkish air forces civilian airliner, which was performing the flight “Moscow-Damask”. Even more conceptual factors of foreign effect on character and environmental Russian-Turkish relations keep on playing their part. For example, significant approach between Turkey and the USA on a wide range of regional issues, by this with expressed military-political coloring.


Last events in neighboring to Turley regions added another potential problem for Russia. Famous dispute between Turkey and the Republic of Cyprus around mineral resources consumption at the shale of Aphrodite island resulted into inconvenient for foreign actors declarations of Turkish leaders. They threatened to break the contracts with foreign companies, holding drilling in Greek part of Cyprus. Among such companies together with Italian “ENI”, French “Total”, there is also Russian “NOVATEK”. Although “Gazprom” has nothing to do with the development of Cyprus shale but mentioning of Italian “ENI” worries the initiators and main shareholders of the “South Stream” project.


50% share of foreign equity participation in the project in September 2011 was revised in favor of diversification. Italian “ENI” ceded from its initial 50% share of equities in amount of 30% in favor of German “Wintershall Holding” and French “EDF”. Risks were divided, but participation of Italian company as the second key shareholder of the “South Stream” was maintained. The same as remained the risks on possible connecting by Turkey the subject of “Cyprus Shale” with the final consent on piping of the “South Stream” line through the Black Sea.


Turkey can be expected to make a surprise and in terms of their decisiveness on joint accomplishment with Azerbaijan of the project of Trans-Anatolian gas pipeline. Yet the “South Stream” and “TANAP” project gave no reasons to be suspected in competition. But planned for the end 2015 commissioning of the “South Stream” precede the beginning of anticipated for 2017 operation of the second phase of Azerbaijani field “Shakh Deniz”  which should become the resources base for “TANAP| project.


For the “South Stream” to define “TANAP” on the issues of commissioning, Gazprom developments on the project should start in the end of this year. Which has been repeatedly stated by Russia. It is also stated that they should persistently demand from Turkey preservation of previous agreements.


Translated by EuroDialogueXXI from politcom.ru