Putin shelves South Stream pipeline project

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Putin shelves South Stream pipeline project

Russian President Vladimir Putin, on a visit to Turkey, has unexpectedly announced that Russia is shelving the multi-billion-euro South Stream pipeline project to deliver Russian gas to Europe, blaming the EU for throwing obstacles in its path. [Updated with OMV reaction.]


Putin said Russia would instead look at creating a gas hub on the Turkish-Greek border.

The pipeline was to have run under the Black Sea to southern and central Europe, bypassing Ukraine and providing another transit route for Gazprom.

But the EU has been worried about the gas producer also owning a pipe network.

Construction work on the 930 km South Stream project began in Bulgaria in October 2013 but was suspended in June after the European Commission said it may be breaking EU competition rules.

Russian officials accused the commission of blocking the work for political reasons.

"If Europe does not want to carry out (South Stream), then it will not be carried out. We are now going to focus our energy resources in other directions," Putin said in Turkey. He suggested that Russia will seek to trade with markets such as Asia instead.

Gazprom made a deal with Austria’s oil and gas company OMV, approving Austria’s section of the pipeline, which Putin previously said would make Austria Europe’s biggest hub for Russian gas.

OMV inked a deal with Russia's Gazprom earlier this year to bring the pipeline to Austria.

Russia’s abandoning the South Stream gas project is “regretful developments for Europe,” OMV chief executive Gerhard Roiss told Austrian broadcaster ORF on Tuesday.

“It is regretful developments for Europe, since it needs Russian gas.  It cannot do without Russian gas,” he said. “But pipeline facilities are needed to ensure secure energy supplies. So, what is going on is a step in the wrong direction.”

“The problem today is that possibilities of supplying south-eastern Europe with gas are reduced and dependence on one supplier and one route via Ukraine is high”.

Austria's Economics Minister Reinhold Mitterlehner told reporters on Tuesday that the South Stream Russian gas pipeline project is most likely dead, but he wants to get more details and an official confirmation.

"In the end we believe this is a matter that still needs to be clarified. I assume that is has really been stopped," he said after a cabinet meeting according to a report from Reuters.

"Gas supplies are not affected by this because this was a future project that would have shown its impact only in several years," he said.

The Austrian steel company Voestalpine is also involved in the contract, for supplying the materials for the pipeline in Austria at a cost of around €200 million. 

Italy's Eni is expected to potentially lose billions of euros as a result of the failure of the project.


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