South Stream: the mountain is bringing forth a mouse

Recently Gazprom’s vice-president, Alexander Medvedev said that when Russia had built the South Stream pipeline, it wouldn’t need the Ukrainian main gas pipelines. But this is just an attempt of wishful thinking. The threats, to which the South Stream project carries for the Ukraine, are too exaggerated sometimes. Especially, in Moscow.

Firstly, Gazprom won’t be able to fully rejec the transit through the Ukraine physically: geopolitics is not yet able to eliminate geography. Secondly, the bringing of South Stream in operating mode will take 3 years (the most optimistic view), or 5 (realistic view); according to the pessimistic view, the project won’t be realized. Third, the $1-1.5 billion that the Ukraine could potentially lose because of South Stream can be compensated by increasing the transit tariffs by two times. Fourth, South Stream has great chances to be never recouped. But the question is not only about money now. South Stream is a detector that will accurately determine whether Kiev can count on the real support of the EU in the gas disputes with Moscow. Cause there will be a lot of them.

Territory of loyalty

Today, the South Stream project has the role of chewing gum, which drowns out an unpleasant aftertaste of the Western economic sanctions in response to Russian aggression in the Ukraine. The Kremlin wants to prove that the sanctions are nothing, are for appearance's sake, and Europe continues to actively cooperate with Russia in serious profitable operations. Proceeding from these considerations, the Russians have developed frenzied activity to promote South Stream.

Over past two weeks, Gazprom managed to conclude two new contracts within South Stream: on June 24th, an agreement on the construction of a section in Austria was signed with the local concern OMV, and on July 8 - similar document was also signed by the company Srbijagas. The latter implies that the pipe, laid in the territory of Serbia, will have two branches towards Croatia and Republika Srpska in Bosnia and Herzegovina. Concurrently, the Russian Foreign Minister Sergei Lavrov visited Bulgaria and Slovenia on June 7-8th, where he pulled out the recognition of participation in South Stream from local governments.

However, the success of the Lavrov’s mission is noticeably darkened by the prospect of early parliamentary elections in Bulgaria, the pretext for which became just accusations of the ruling cabinet of Socialists in corruption in acceding to South Stream. In April, the winner of the tender for the construction of the Bulgarian section of South Stream was considered Stroytransgaz consortium, whose main beneficiary is one of the most close to Vladimir Putin Russian businessmen Gennady Timchenko. The Bulgarian opposition called the decision the largest corrupt transaction in the history of the country (its value is estimated at about $4 billion). Later, the European Commission urged Sofia to freeze the construction. But it chose softer wording, referred to noncompliance of the project with the EU Third Energy Package. As a result, the Bulgarian authorities have been caught in the crossfire, as the country is equally dependent on Russian gas and on European financial aid. So the fate of South Stream may be decided here.

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