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EU Recommends Member States Renegotiate South Stream Pipeline

Construction of South Stream started in Serbia at the end of November.
Construction of South Stream started in Serbia at the end of November.
The European Commission is recommending that all European Union members who have signed agreements with Russia's South Stream natural-gas pipeline project renegotiate the terms of their deals.

Marlene Holzner, a spokeswoman for EU Energy Commissioner Gunther Oettinger, said on December 5 that the agreements signed with Russia's Gazprom contradicted European legislation.

"We have looked into the intergovernmental agreements [IGAs] that were made between the member states through which South Stream would flow through and Russia, and we have seen that on a number of very important core issues of our energy market, these core principles are not reflected in the IGA and that is why we have advised those member states to renegotiate these IGAs," Holzner said.

Holzner went on to list the conflicts involved in the South Stream agreements.

"One point is the unbundling. We believe that in the European energy market, gas security and also competition is best served if there is not one company importing and producing gas and owning the pipeline, fixing the tariff, but we would like to see that there is an unbundling," she said.

"Now, in part of the IGAs it is said that basically it is Gazprom that will manage the pipeline -- that would not be according to existing European legislation for new pipelines."

The proposed South Stream pipeline route, according to Gazprom
The proposed South Stream pipeline route, according to Gazprom

Holzner pointed out there was also a problem with "third-party access."

"For the same reason, for competition and also gas security, we say that gas pipelines must be open for other gas companies," she said. "That means for French, German companies, whatsoever. In the IGAs we have seen [that] it says actually this is a pipeline for Russian gas."

Construction Continues

Holzner said the EU was not opposed to the construction of the pipeline, and indicated work on South Stream could continue.

"There is nothing that is foreseen in our energy legislation saying if there is an infringement we can stop," she said, but indicated problems could arise once gas companies "book a certain capacity of gas to be transported for a certain amount of time through your gas pipeline."

Holzner said that moment would call for a review to see if the deals were in line with EU legislation.

As for the Russian side, Holzner said that if Gazprom was reluctant to reopen negotiations on South Stream, the following scenario would play out.

"In case that Russia says we do not want to renegotiate this international agreement, then we have to advise the member states that they just will not apply this agreement because it is not according to EU legislation," she said. "If they go ahead we may have to start infringement procedures."

EU members along the South Stream project are Bulgaria, Croatia, Hungary, Greece, Slovenia, and Austria. Serbia, an EU candidate, is also part of the project.

Serbian Energy Minister Zorana Mihajlovic emphasized on December 4 that South Stream was vital for her country and the creation of badly needed jobs.

She said the EU-Russia dispute was a matter those two parties need to resolve between themselves and added, "A small country like Serbia cannot be expected to revise the agreements with Gazprom if this was not required of any other country."

Construction of South Stream started in Serbia at the end of November.

The latest development came after Gazprom opened a representative office in Brussels on December 4.

With reporting by ITAR-TASS, Interfax, RFE/RL Brussels correspondent Rikard Jowziak, and
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