A suggestion by Ukrainian President Viktor Yanukovich that South Stream be built through Ukraine has been quickly rebuffed by the future pipeline's shareholders in favor of its planned route through Bulgaria.

Viktor Yanukovich suggested on Friday building the South Stream, a project aimed at diversifying Russian gas routes away from transit countries such as Ukraine, through Ukrainian territory.

"We are suggesting a flexible approach to the construction of the South Stream. The South Stream should pass overland in the south of Ukraine," Yanukovich said at an international forum, as cited by RIA Novosti.

Ukrainian President Viktor Yanukovych spoke at the 8th Yalta Annual Meeting YES, named "Ukraine and the World: Common Challenges, Common Future.“ The Yalta European Strategy (YES) is an international network that promotes Ukraine`s European integration.

He stated that building the South Stream through Ukraine would make it five times cheaper than the current price of some EUR 20 B.

Yanukovich's suggestion came shortly before Gazprom, Eni, EDF, and BASF's Wintershall signed a shareholder agreement for the offshore section of South Stream.

Ukraine accounts for 80 percent of Russian gas transit to EU nations but frequent rows with Moscow over gas prices sometimes end with Kiev switching the gas tap off in the middle of the winter. Ukraine is now trying to renegotiate a 2009 post-gas war deal with Russia, which ties the price for gas to the price for oil, which has been rising steadily. The Kremlin said Yanukovych will meet his counterpart Dmitry Medvedev in Russia on September 24 in another attempt to negotiate a lower price for Russian gas.

The latest dispute with Ukraine has been used by Gazprom as another argument as to why it needs the South Stream pipeline.

Russia began filling gas into the Baltic Sea's Nord Stream pipeline that runs directly to Germany on August 6.

Yanukovich's proposal to have South Stream run through Ukraine was rejected almost immediately by Gazprom Deputy Director Valery Golubev who said building South Stream via Ukraine was unreasonable from an economic point of view.

"They have been offering this for a long time," the firm's deputy chairman Valery Golubev was quoted as saying by Interfax. "But why do that, when we can just run the pipeline straight?"

The South Stream pipeline—considered a rival project to the European Union-backed Nabucco project—is envisioned to ship up to 63 billion cubic meters of Russian natural gas a year under the Black Sea to European customers from 2015.

The South Stream pipe will start near Novorosiysk on the Russian Black Sea coast, and will go to Bulgaria's Varna; the underwater section will be 900 km long.

In Bulgaria, the pipe is supposed to split in two - one pipeline going to Greece and Southern Italy, and another one going to Austria and Northern Italy through Serbia, Croatia and Slovenia.

Bulgaria's Bulgargaz, a subsidiary of the Bulgarian Energy Holding, and Gazrpom signed a road map for the construction of the Russian sponsored South Stream pipeline in Varna in July 2010, and during Putin's visit in Sofia in November 2010, they signed a shareholders' agreement for the project company, which is to construct the Bulgarian section of South Stream. Both parties will have 50% of the shares in the joint venture.

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