Pipeline Cements Russia's Hold on Europe's Gas Supply

Views on BG | January 20, 2008, Sunday // 00:00

The New York Times

Russia strengthened its grip on Europe's energy supplies on Friday as it signed a major gas deal with Bulgaria that analysts said would further undermine the European Union's attempts to diversify its energy sources.

Under the agreement, the $15 billion South Stream pipeline will be built under the Black Sea, allowing Russia to send natural gas directly to Europe through Bulgaria and bypassing Turkey, which has been a crucial transit route for Russia's gas exports to European markets.

The pact, signed by President Vladimir V. Putin of Russia and his Bulgarian counterpart, Georgi Parvanov, was sealed after late-night negotiations with Gazprom, Russia's state-owned energy monopoly.

Mr. Putin and Mr. Parvanov also signed an agreement for the construction of a nuclear power plant, the first Russian one to be built in a European Union country. Construction began in the 1980s but was halted in 1990. Planning for the project was revived in 2003.

The agreement on the South Stream pipeline dealt another blow to Nabucco, a major European Union gas pipeline project designed to diversify energy sources and reduce dependence on Russia. The union intends to buy gas from Iran and Azerbaijan and ship it through Turkey in pipelines that are run to Southern and Western Europe. But disputes over the routes, financing and how to deal with Iran's nuclear program have delayed the project.

Bulgaria, which joined the European Union a year ago, is also a member of the Nabucco consortium. The other countries are Austria, Turkey, Hungary and Romania.

Russia has an almost complete monopoly over Bulgaria's energy market, said Ognyan Minchev, director of the Bulgarian office of the European Council on Foreign Relations.

"The E.U., shockingly, acts like a naГЇve bystander, completely blind to the major strategic reconfiguration that is taking place in the Balkans," Mr. Minchev said.

Under the terms of the South Stream deal, Russia and Bulgaria will each have a 50 percent stake in the Bulgarian portion of the pipeline.

The 560-mile pipeline will cross Bulgarian territory, transporting around 1 billion cubic feet of Russian gas a year. In Bulgaria, it will branch into two spurs: one going west to Italy, the other going north into Austria or Hungary.

Analysts said the deal could undermine Bulgaria if it later sought alternative energy sources.

"The 50-50 deal is not enough to defend Bulgaria's national interests," Mr. Minchev said.

Russia is poised to take over the state-owned Petroleum Industry of Serbia, which would increase Gazprom's influence in the Balkans, analysts said.

"What the E.U. lacks is political will in dealing with these energy issues and pushing Nabucco forward," said Borut Grgic, director of the Institute for Strategic Studies, an independent policy center in Ljubljana, Slovenia.

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