Russia's monopoly Gazprom admitted for the very first time that the fate of the gas pipeline, a mega-project, estimated at USD 30 B, actually depends on the Ukraine.

In an article titled "The Unnecessary Pipe," the Russian "Vedomosti" writes that if Kiev and Moscow mange to seal an agreement for the joint use of Ukraine's gas network, which carries 2/3 of Gazprom's export to Europe, South Stream could be axed.

Gazprom CEO, Alexei Miller, had told the Interfax news agency that South Stream had always been linked with the Ukraine. The pipeline project was created as an alternative to Ukraine's network, but the two countries are now discussing establishing a joint company, based precisely on Ukraine's gas transport system.

The last round of talks is scheduled for January 15, and if an agreement is reached, Moscow will have 3 options – reduce the capacity of South Stream, delay the construction, or scrap the project altogether, a source, close to Gazprom is quoted saying. The same is reported by "Vedomosti," citing a member of the Russian cabinet.

"Vedomosti" further writes that a Gazprom representative, who only two weeks ago insisted that South Stream will be built on time and on schedule, had declined to comment on Miller's statements.

At the end of November, Alexei Miller, firmly rejected speculations of Western-Balkan media that the South Stream gas transit pipeline will go around Bulgaria. He was firm Bulgaria remains on the South Stream route, stressing Russia had already signed an agreement with Bulgaria on government level.

Inter-government agreements on South Stream have also been signed with Serbia, Hungary, Greece, Slovenia, Croatia and Austria.

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

In Bulgaria, the pipe was 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.

After the preliminary survey for the Bulgarian section of South Stream is completed, Bulgaria was to make a final decision on a EUR 500 M investment in its section of the South Stream project.

Russia planned to launch the South Stream pipeline in 2015. The pipeline will transport up to 63 billion cubic meters of gas under the Black Sea to central and southern Europe, diversifying Russian gas routes away from transit countries such as Ukraine, which currently is at odds with Russia over the price of gas. Ukraine currently accounts for 80% of Russian gas transit to EU nations.

Bulgaria's Bulgargaz, a subsidiary of the Bulgarian Energy Holding (BEH), and Gazrpom signed a road map for the construction of the Russian sponsored South Stream pipeline in Varna in July 2010. During Russian Prime Minister, Vladimir 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

In addition to Gazprom, three major Western European energy companies - Italy's Eni, France's EDF, and Germany's BASF are shareholders in the project.

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