Construction of South Stream in Serbia to Start by End of Year
Serbian officials have announced that the construction of the Serbian section of the South Stream natural gas pipeline, which they expect will bring the country major benefits, will begin by the end of the year in partnership with Russia.
Namely, Belgrade representatives believe that the Serbian firms involved in the construction of the pipeline will earn between 600 and 800 million euros, and that the budget will annually rake in up to 200 million once the pipeline becomes operative, but also that it will help enhance the state’s geostrategic position.
“South Stream is one of the best and geostrategically most important projects Serbia has been involved in since World War II,” co-director of the company South Stream for Serbia Dusan Bajatovic said at the July 11th conference titled South Stream: The Evolution of a Pipeline, in Belgrade.
According to him, tenders for the construction of the pipeline’s section in Serbia, worth 1.85 billion euros, will be called on September 15, and the works are due to kick off in late November or early December. He said that Serbia’s annual revenue from South Stream will be about 200 million euros once the pipeline starts operating, meaning the project will quickly pay off.
The section through Serbia will be 422.4 kilometers long and two branches will be built – to Republika Srpska and Croatia. The Serbian side has also proposed the construction of branches to Kosovo and Montenegro, but Gazprom has not given a final answer to that yet. Macedonia has also expressed the desire to get a branch of the pipeline from Serbia, even though it has the option of obtaining supplies through Bulgaria.
“Serbia can be the heart of energy transport in the Balkans,” said Bajatovic. He further said that South Stream, as far as its geostrategic role is concerned, is one of the most important projects Serbia is involved in since World War II. According to him, the competitive project, the Nabucco pipeline, will fail, whereas other competitive project can compare with South Stream the same as “a fly can compare with an elephant.”
The other co-director of South Stream in Serbia, Alexander Syromyatin, has confirmed that Gazprom will finance the realization of the project in Serbia. “The financing of the South Stream project has practically been resolved, all we have left are some practical issues. The money will be secured from loans granted by a pool of Russian banks,” he said. Syromyatin added that money has been set aside for land expropriation, which is going according to schedule. “Expropriation will be completed within the deadline, but of course for the section that will be built first. The money for future sections of the route will be secured in the future, no sooner than next year,” he said.
Responding to a remark by a Serbian journalist that the company for the building of South Stream is registered in Switzerland rather than in Serbia, and that the Russian side holds a 51 percent stake in it, Syromyatin said this would not harm the project, or the partnership of the two states.
“The fact that the joint Russian-Serbian company for South Stream is registered in Switzerland is standard Gazprom practice, as it usually registers joint companies either in Switzerland or in the Netherlands,” said Syromyatin, stressing that this was also done for the purpose of securing funding for the pipeline project.
According to him, after registration in Switzerland, a daughter company was founded in Serbia and the Serbian and Russian partners are jointly running affairs in the company, with the entire venture adhering to current Serbian laws.
Syromyatin also said the whole project is going according to plan, i.e. that 300 of the planned 3,000 kilometers of the pipeline have been built in Russia, and that works have begun on the gas station in the Black Sea. He explained that the pipeline’s end point will be the Italian city of Treviso, where Gazprom plans to build a large facility.
Bajatovic also said that the fact the company was registered in Switzerland did not mean money would be taken out of Serbia. “Income will go through a company in Novi Sad (Serbia) and will be taxed in Serbia at a rate of 15 percent. Any capital that would be transferred to Switzerland would be subject to five percent tax in Serbia,” said Bajatovic.
He added that apart from the construction of the South Stream pipeline, there was also an agreement with Russia on increasing the capacity of the Banatski Dvor underground gas storage facility, the construction of a new storage facility in Itebej, and the connection with Bulgaria and Romania via two-way pipelines.