Construction of South Stream in Serbia Most Likely to Start in July
Although there is no agreement between the European Union and Russia over the South Stream natural gas pipeline, Russian Gazprom has announced that the construction of the pipeline’s section in Serbia could start in July.
European Commission President Jose Manuel Barroso said in Brussels on May 27 that by building a section of South Stream Bulgaria was violating the rules of the EU and added that the European Commission would take measures to prevent that from happening. However, just two days later, head of Gazprom’s international projects department Alexander Syromyatin announced plans for building the pipeline in Serbia, the country that is, after Bulgaria, the next on the route to the final users of Russian gas in Western Europe.
“We expect to be able to launch the works as early as July,” Syromyatin told reporters in Belgrade, during a break in the meeting titled Role of Serbia in the Balkan Energy Market, organized by the Natural Gas Europe and the Chamber of Commerce and Industry of Serbia.
Apart from the discord between the EU and Russia, Serbia also has a specific problem in the construction of the pipeline – the Serbian budget is seeing a chronically large deficit and lacks the funds for such a big investment. The investment in the pipeline section running through Serbian territory would cost at least 1.7 billion euros.
The Russian and Serbian side are on the brink of reaching a solution for the beginning of the works – Gazprom has offered Serbia a loan. Syromyatin said that the two sides are to sign an agreement in two weeks’ time, and stressed that the loan for financing South Stream would be according to the most favorable conditions and that there are few companies that would offer interest of about four percent.
It was said earlier that the loan, aimed at securing the founding share of Srbijagas in the joint company with Gazprom in order to implement the South Stream project in Serbia, will amount to 275 million euros.
Siromyatin said that the winner of the tender for the South Stream contractor in Serbia is to be selected soon. He indicated that the South Stream project is running according to plan, and that the Ukrainian crisis has only shown that the right thing was done in starting the implementation of the pipeline’s construction.
Asked to comment on Russian President Vladimir Putin’s position that the South Stream project may be revised, he said that there were different options for the pipeline route. “We have different options for the pipeline route and depending on the situation we can change the route,” Syromyatin said.
A solution to the South Stream problem is simultaneously being sought on the line European Commission-Bulgaria. The European commissioner for energy, Guenther Oettinger, said in Brussels on May 28 that in talks with the Bulgarian government the European Commission is aiming to find a solution that would harmonize the South Stream pipeline section in Bulgarian territory with European regulations. “The negotiations are going well in Bulgaria, the Bulgarians have an intergovernmental agreement with Russia, we are talking with Sofia and pointing out to them that this is not completely in tune with European regulations,” said the European commissioner.
Serbian Chamber of Commerce President Zeljko Sertic confirmed the importance of South Stream for Serbia and the other states in the region it will run through. “The benefits for the Serbian and the economies of the region will be visible in the first works that will directly involve several thousand people… The implementation of the project in the long term will enable the stable and sustainable development of the domestic and regional economy, and especially of the production that uses gas as fuel or raw material in production,” Sertic said at the Natural Gas Europe meeting in Belgrade.
Addressing participants of the meeting, Syromyatin said that Gazprom was the biggest natural gas supplier in the world, which is why it saw its mission in the secure and balanced supply of its consumers. According to him, a significant portion of the gas Russia delivers to Europe is distributed via Ukraine, Belarus and Moldova, which envisages certain risks, because the partners do not always fulfill their obligations. “By accomplishing its mission as a secure gas supplier, Gazprom considers the further diversification of deliveries through the forming of new routes in gas deliveries its contribution to Europe’s energy security,” the Gazprom official said. He added that the first quantities of gas are to run through South Stream in 2015, while it will reach its full capacity in 2018, which will conspicuously diminish the risks in gas deliveries to EU consumers.
Igor Jovanovic