Russia signs deal with European nations for gas pipeline

Companies from four European nations today signed an agreement with Russia’s natural gas monopoly Gazprom to be supplied by a new pipeline – a project that has raised concerns about increasing European dependence on Russian supplies.

The Russian project could hamper European Union plans for a separate pipeline that would carry gas from the Caspian Sea west and reduce European Union (EU) energy dependence on Moscow.

The South Stream pipeline is to pipe gas west from Russia across the Black Sea on a route that bypasses Ukraine, whose bitter price battles with Moscow have prompted Russian cut-offs that have decreased supplies to European nations.

Those problems have led the EU to seek to diversify its import routes and Russia to seek to diversify its export routes.

With Russian Prime Minister Vladimir Putin and Italian premier Silvio Berlusconi looking on, Alexei Miller – chairman of Gazprom, and the CEO of Italy’s Eni, Paolo Scaroni, signed a deal Mr Putin said would enable organisers to double the planned capacity in the section crossing the Black Sea from 31 billion cubic metres to 63 billion cubic metres a year.

Mr Miller also signed separate agreements with energy companies from Greece, Serbia and Bulgaria to co-operate on feasibility studies and construct South Stream sections in those countries.

“With Italy, Bulgaria, Serbia and Greece, this is our common contribution to European energy security,” Mr Putin said.

Russia also expects to sell gas from the pipeline to Hungary and Austria.

Before the signing ceremony in the Black Sea resort city of Sochi, Gazprom spokesman Sergei Kupriyanov said the exact route would be mapped out after feasibility studies that are to be completed by mid-2010.

Gazprom and partner Eni want to complete constructing the undersea stretch in 2013, and planners anticipate the pipeline will begin operating by 2015.

The Russian project is widely viewed as a rival to EU plans for a separate pipeline, Nabucco, that would bring gas from former Soviet republics south of Russia across Turkey and further west. But there are concerns that there will not be enough gas to fill it – a potential problem to which Russian officials have repeatedly drawn attention.

“We have nothing against alternative projects,” Mr Putin said. However, “before putting millions of dollars into a pipeline and burying it in the ground, you have to know where the gas for this pipeline is going to come from”.

Russia supplies about a quarter of Europe’s gas needs.

Plans for South Stream and a Baltic Sea pipeline called Nord Stream have increased EU concerns about dependence on Russia.

But Mr Kupriyanov contended that South Stream is no threat to Europe.

“It’s a helping hand,” he said.

However, some analysts are sceptical. Chris Weafer, chief strategist at UralSib investment bank in Moscow, said: “Russia is very keen to keep and increase its control over Europe’s gas imports.

“They want to kill off Nabucco or substantially delay it.”

South Stream’s cost is estimated at $20bn (€15bn) and rising – at a time when the demand for energy is uncertain.