Russian gas monopoly Gazprom this week inked a landmark deal with Austria's OMV energy firm to build the country's section of the controversial South Stream natural-gas pipeline, which would pump gas from the Black Sea to Austria.
The move comes just weeks after another European Union member, Bulgaria, suspended work on the project following criticism from Brussels.
RFE/RL's Claire Bigg spoke to Edward Lucas, a senior editor responsible for energy issues at Britain's "The Economist," to get a sense of the significance of the Austria deal -- and why Vienna is pressing ahead while Sofia has stepped on the brakes.
RFE/RL: The agreement, signed on June 24 as Russian President Vladimir Putin was in Vienna to lobby for the embattled South Stream project, has been described as a resounding triumph for Russia. Do you share this view?
Edward Lucas: I think that the victory for Mr. Putin may prove more symbolic than real. I still have doubts that the South Stream will ever actually be built. It's extremely expensive, particularly for the Russians. I'm sure, also, heads will be [scratched] and eyebrows beetling in Brussels because this is a clear challenge, again, to the important role of the EU as the rule-setter in European energy policy.
RFE/RL: The European Commission has been opposed to the project in its current form, saying it does not comply with EU competition law and counters the bloc's policy of diversifying supply sources to reduce dependence on Russia. Austria, in turn, argues that Europe is too reliant on Russian gas to be picky. Is Brussels' inflexibility over these points justified, in your opinion?
Lucas: I don't think the EU should be flexible on the main point, which is that you shouldn't be allowed to own both the pipeline and the gas. They want to have an open access to pipelines. First of all, procurement has to be within the EU framework for government procurement. So it's not right that the contract South Stream has just handed to Mr. Putin's friend, Gennady Timchenko, and his Stroitransgaz [was done] without a proper tender.
More importantly, we are trying not just to diversity sources of supply in the EU, we are also trying to liberalize the gas market. And having Gazprom building another Gazprom-owned pipeline on the European territories is bad from that point of view. If Gazprom wants to sell gas to Europe that's fine, but they have to fit within the rules of the European single market.
I'm afraid there's a political dimension here, that Russia wants to bust those rules because it doesn't like the EU as a kind of political entity that can challenge Russia.
RFE/RL: The crisis in Ukraine has made South Stream, which would bypass Ukrainian territory, a new focus of tensions between Moscow, Brussels, and Washington. Moscow accuses the European Union of pressuring Bulgaria into halting work on the pipeline as retaliation for Russia's actions in Ukraine. During his visit in Vienna, Putin said South Stream "should not be politicized." How big a role does politics, particularly the Ukrainian crisis, play in the current negotiations on South Stream?
Lucas: It plays a huge role. I think any idea that you can discuss gas in a depoliticized context is ridiculous. Russia uses gas as a political weapon. The EU has made a political decision to liberalize its gas market. So this is, ipso facto, a political issue.
RFE/RL: South Stream has exposed rifts within the European Union between counties that are on friendly terms with Moscow, like Austria, and those that want to take a harder line against Russia. Do you believe, like many analysts, that Putin is trying to exploit these divisions to undermine the European Union and its energy policy?
Lucas: Ever since Putin came to power, there has been a systematic attempt to play divide-and-rule between Europe and America, but also within Europe. He has tried to play big countries off against small ones, gas-dependent countries off against each other, and so on. This is a major part of the way Russia treats Europe. And Europe has a very mixed record in standing up to it.
RFE/RL: Brussels has put a lot of pressure on Bulgaria and Serbia to suspend work on their section of South Stream. Has Austria come under similar EU pressure and refused to buckle, or does Brussels simply tend to be more lenient with older member states?
Lucas: So far, the pressure has been very much on Bulgaria, because of course if Bulgaria doesn't build the pipe then there's nothing to worry about in Austria. But it's easier to beat up a new member state than an old member state.