Russia Mulls Freezing South Stream Gas Line

Moscow could soon freeze temporarily its gas pipeline project "South Stream" and increase gas export to Europe thanks to Germany as a reliable partner.

The information was reported by the Russian news agency RIA Novosti, citing the Russian daily Kommersant and an unnamed source from the Russian cabinet.

In August 2009, Russian Prime Minister, Vladimir Putin and his Turkish counterpart Recep Tayyip Erdogan signed an agreement to have the pipeline pass under Turkish Black Sea waters.

In exchange, Moscow was to build the "Samsun-Djeihan" oil line, which is very favorable for Turkey, and to the detriment of the Russian "Burgas-Alexandroupolis" oil line, along with the first Turkish Nuclear Power Plant to be built by the Russian State company Rosatom.

Despite all of the above, and Ankara's initial commitment to a December 2010, deadline, Russia is yet to receive a green light for "South Stream" to go under Turkish waters.

The new deadline for the Turkish side to give an answer is November 2011, but according to same Russian cabinet source, it is very likely this deadline would end up not being adhered to.

For the execution of South Stream, which is a competitor to EU-sponsored pipeline Nabucco, Russia has signed bilateral cooperation agreements with Bulgaria, Serbia, Hungary, Greece, Slovenia, Croatia, and Austria. Bulgaria's neighbors Romania and Macedonia are also to be included.

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.

The project was initiated by Gazprom and the Italian company Eni, with French company EdF and German BASF to join as shareholders.

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.

The preliminary survey for the Bulgarian section of South Stream is expected to be completed by the end of March 2011, and after that Bulgaria will make a final decision on an EUR 500 M investment in its section of the South Stream project.