Russia scraps controversial gas pipeline to Europe

In a surprise development, Russia yesterday backed down in the standoff with the European Union over the construction of the South Stream gas pipeline to Europe, and will instead look into creating a gas hub in Turkey near the Greek border.

"Taking account of the fact that until now we have not received permission from Bulgaria, we believe that in the current conditions Russia cannot continue with the realisation of this project," said Russian president Vladimir Putin during a one-day visit to Turkey.

"If Europe does not want to carry out (South Stream), then it will not be carried out," Mr Putin said, speaking to reporters alongside Turkish president Recep Tayyip Erdogan (pictured). "We are now going to focus our energy resources in other directions."

Mr Putin said Russia could instead build a gas hub close to the Turkish-Greek border to supply Europe with gas. 

Promoted by Russia’s state-owned energy company Gazprom, the $40bn South Stream project had been intended to pipe 63 billion cubic metres of gas a year under the Black Sea to Southern and Central Europe, bypassing Ukraine.

energy ministers and companies (on both sides) were ordered to look into these proposals in detail … It is hard to assess the costs, financial mechanisms, terms of fulfilment for now– Alexander Novak, Russian energy minister

It was to land on the Bulgarian coast and then pass through Serbia and Hungary, but under pressure from the European Commission (EC) and the US, Bulgaria froze work on the scheme in June. The EC says Gazprom’s plan breaks EU competition rules. It wants Gazprom to make the pipeline available for use by other gas suppliers.

Preparations for work on the offshore section had been underway, however. Last month the second largest crane vessel in the world passed through the Bosphorus into the Black Sea to start laying pipe.

South Stream has split the EU, with the EC and some northern states arguing against it and southern states who stand to benefit from the gas supporting it. On 3 November Hungary defied the EC by passing a law clearing the way for the pipeline’s construction on its territory.

Diverting to Turkey

Hit by Western sanctions over its actions in Ukraine and by plummeting oil prices, Russia, which depends on energy exports, has signed major gas supply deals with China. 

Now Russian and Turkish officials are discussing a new plan to divert the Black Sea pipeline southwards to Turkey. According to reports, Russia offered to combine it with a gas hub at the EU’s southeastern edge, on the Turkish-Greek border, to supply southern Europe.

Accompanying Mr Putin to Ankara, the Turkish capital, was Alexei Miller, chief executive of Gazprom. He told reporters that Gazprom had that day signed a memorandum of understanding with Turkey’s state-owned pipeline builder, Botas, on the under-sea pipeline. 

Plans are at an early stage, however. Reuters reported Russian energy minister Alexander Novak as saying: "energy ministers and companies (on both sides) were ordered to look into these proposals in detail … It is hard to assess the costs, financial mechanisms, terms of fulfilment for now."

Mr Putin hit out at the EU, accusing it of denying Bulgaria, which is heavily dependent on Russian gas, its sovereign rights. He added that blocking South Stream had been "against Europe’s economic interests" and that it "is causing damage".

He also announced that Russia would give Turkey a 6% discount on Russian gas from next year.

Photograph: Russian president Vladimir Putin, left, with Turkish president Recep Tayyip Erdogan during Mr Putin’s one-day visit to Turkey on 1 December (Sasha Mordovets/Getty Images)

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