The Italian government, which holds the rotating EU Presidency, favours the Russian-backed South Stream gas pipeline and can help the projectbe implemented soon, a top expert has said.
“The Italian government has got a long list of pressing issues and they don’t have time for charades or shadow boxing,” Chris Weafer, founding partner of Macro-Advisory, a Moscow-based business and investment consulting group,told New Europe in a phone interview on 11 July, adding that Italy wants South Stream to be completed. “In my opinion there is no doubt that South Stream will be built,” Weafer said, adding that it will likely involve some re-negotiations in part, and there is still uncertainty over the timeline.
South Stream, which is intended to bring an annual 63 billion cubic metres of Russian natural gas to Europe bypassing Ukraine, is backed by Russian gas monopoly Gazprom, Italy’s ENI and France’s EDF.
Weafer said that there is a political will on the part of the countries that would benefit from South Stream to push ahead with the project so a schism has emerged between the countries that plan to receive gas from South Stream and the EU Commission in Brussels.
“There is definitely a clearly a gap there. But it seems to me that the countries that would benefit from South Stream gas absolutely want to build it and seen now more inclined to push ahead even without approval from Brussels,” Weafer said.
On July 9, Russian Foreign Minister Sergei Lavrov met Italian counterpart Federica Mogherini in Moscow, saying their countries have confirmed their goal of completing South Stream. “Today we confirmed our goal on completing the construction project of the South Stream gas pipeline. We confirmed our intention to continue active work in order to remove all issues that may arise, including in regard to dialogue with the European Commission and taking into account intergovernmental agreements that have been signed by the participating countries in the project,” Lavrov said at a joint press conference.
Commission puts up a fight
Weafer told New Europe that Brussels is still putting up very strong resistance. “It’s very much the EU Commission versus the member countries. “If we get into the autumn and there is still no resolution with Russia and Ukraine and there is any threat of gas disruption that could be a really difficult issue between the Commission and member countries because South Stream is an extra pipe coming into Europe, it brings an extra route, it brings extra gas into Europe,” Weafer said.
All these countries basically want the maximum amount of imported energy, the maximum amount of routes they can manage. For them that represents the potential for a competitive market and energy security, he said.
However, the decisive factor was the South Stream deal that Russia signed with Austria when Russian President Vladimir Putin was Vienna. “Once the other countries in the Balkans and Italy saw that they basically said: ‘That’s it; we’re not waiting any longer,’” Weafer said.
The Moscow-based expert reminded that it is well accepted that the energy security issue has to do with the transit pipeline across Ukraine. “It has not to do with Russia’s willingness to sell gas. It’s never been an issue with the Soviet Union and the only two disruptions were specifically linked to Ukraine,” Weafer argued.
He also noted that the other countries, including the Balkans, Italy and Austria point to the example of Germany where Berlin solved the same issue with Ukraine after the second disruption in 2009 and went ahead and built the Nord Stream pipeline quite quickly. Energy security for them was a pipe direct from Russia straight to Germany,” he said.
Breaking Gazprom's monopoly
Weafer also sees a connection between the difficult Ukraine-Russia negotiations over a new gas contract that have dragged on for so long and Russia negotiating with Brussels on their issues with Gazprom concerning the Third Energy Package, which is holding up South Stream.
The question of Gazprom’s dominant position as a supplier is also part in the three-way negotiations over Ukraine. “The EU Commission cannot have any strategic objection to South Stream because an extra pipe coming in to Europe will add more options for gas supplied in the future and will add more security to Europe,” Weafer said.
“The issue as always has been Gazprom’s monopolistic position as a major supplier of gas to Europe. The EU Commission continues to look for Russia’s commitment to break Gazprom’s monopoly position and I think if Russia were to make some concessions on that, the EU Commission would also remove objections to South Stream,” he said.
EU clock is ticking
Weafer said that there’s now a ticking clock in terms of trying to come to some agreement with Russia over Gazprom so that the European Commission can approve South Stream. “We might be getting closer to some resolution on negotiations with Brussels over Gazprom’s role because the EU Commission is under a lot of pressure to wrap up the South Stream issue,” Weafer said. “It would be quite embarrassing for the EU Commission if they were objecting to the pipe and it was actually already built. And in the next couple of years that’s what’s going to happen – the pipeline will get built,” he added.
Overall, Weafer noted that the European Commission is getting more and more isolated on the South Stream issue at a time when they are coming under more pressure from member state to remove their objections against a backdrop of a more difficult internal EU politics emerging. “There is a good chance that we will see this being resolved maybe over the next to six to nine months and the EU Commission giving the green light for something that is inevitable anyway,” Weafer predicted.
Meanwhile, Russia is progressing with the project. On July 8, a subsidiary of Russian gas giant Gazprom announced it had signed a contract with Serbia to begin construction on its section of South Stream. “Centrgaz will focus on design, procurement, construction and installation activities, personnel training and commissioning of South Stream in Serbia,” Gazprom said in astatement. “The contract stipulates involving Serbian subcontractors in carrying out certain operations.”
Moreover, Gazprom said it was considering more exploration work in Croatia, a host of South Stream. Gazprom ChairmanAlexei Millerled a delegation to Croatia to meet with President Ivo Josipovic and Prime Minister Zoran Milanovic.
Gazprom saidspecial attention was paid to the participation ofGazprom Neft, the oil production arm of Gazprom, in bidding for the rights to explore and develop energy reserve fields in Croatia in the future.
Both sides, Gazprom said on July 10, discussed the construction aspects of the leg of South Stream through Croatia.
http://www.neurope.eu/article/italy-help-russias-south-stream-overcome-eu-commission-hurdles