Bulgaria: Bulgaria Suspended Works on the Gas Pipeline

20. June 2014. / SEE Energy News

The decision was preceded by the request of the Еuropean Commission to cease the works until the modification of the bilateral agreements which Russia had concluded with the EU member states through which the pipeline should pass

Bulgaria has ceased the works on the project “South Stream” following the request of the European Commission, the Bulgarian Prime Minister Plamen Orešarski announced on 8th June. It has been announced that the next steps will be specified after additional consultations with Brussels. The Minister of Energy Dragomir Stoynev, who received this news while visiting China, said that Bulgaria had not given up on the project and that it was irrevocable. Stoynev expressed his belief that the “South Stream” would be built after it had been defined as a European project and that solutions to all problems would be found. Reacting to this decision, the Russian representative in Brussels Vladimir Čižov said that this was a purely political decision and that the EU policy towards the project “South Stream” might be considered a transition to economic sanctions against Russia.
The decision of the Bulgarian Government was preceded by the request of the Еuropean Commission that Bulgaria suspend the works on the gas pipeline construction until the revision of the bilateral agreements which Russia had concluded with the EU member states through which the pipeline should pass. The spokesperson of the Commissioner for Energy Günther Oettinger, Sabina Berger said in this context that Bulgaria would risk a lawsuit if they did not comply with the decision.
A new objection has also been added to Bulgaria, that it gives privileges to the Russian participants in the tender for the construction of the “South Stream”. A clarification has been demanded from the Bulgarian government because they did not publicly announce the tender for the construction of the Bulgarian part of the gas pipeline, because of which, as it has been stated, there is a suspicion that the tender was conducted with the giving of privileges to the Russian and Bulgarian participants. This is just the first step towards submitting an application to the European Court in Strasbourg. If the court ruled in favour of the European Commission, Bulgaria would have to cease the works or to face a drastic fine.
On this occasion, Minister Stoynev said that the “South Stream” was not a Bulgarian but a European Project. He added that contractor selection had been performed in accordance with the procedures of the Bulgarian and European legislation and he announced that, on 13th June, the representatives of the European Commission would visit Bulgaria so as to solve the existing discrepancies.
From the beginning, the implementation of the project “South Stream” has been followed by numerous controversial issues. The most important remark, from the perspective of the EU, is the official interpretation that the “South Stream” contradicts to the Third Energy Package. Namely, according to the EU rules, the owner of gas may not also be the owner of the pipeline through which the gas is transported. In addition, a third party must also be enabled to connect to the gas pipeline. So far, Russia has signed intergovernmental agreements with six members of the European Union – Bulgaria, Hungary, Greece, Slovenia, Italy and Austria. On this issue, the European Commission has taken the stand that the intergovernmental agreements about the construction of the “South Stream” must be brought into conformity with the EU laws. On this occasion, the Russian representative Čižov clarified that the agreements would be revised through the mediation of the European Commission by the year 2016. In the light of the Ukraine crisis, the European Parliament has taken the stand that the “South Stream” should not be built and that the EU should reduce the dependence on the Russian gas.
Another controversial issue is the European anti-trust investigation against the Russian energy company “Gazprom” and the working group on “South Stream”, the formation of which has been agreed upon by the European Commissioner for Energy Günther Oettinger and the Russian Minister of Energy Alexander Novak. The group should discuss legal matters – tenders, environment, competition and internal energy market, but also technical issues.
The position of the Russian party is that the “South Stream” and other transboundary energy projects do not fall under the Third Energy Package. This is supported by the data that Russia and EU have managed to solve the misunderstandings about the exceptions to the Third Energy Package for the gas pipeline “Opal”, which is connected to the “North Stream”.
Precisely the question of how exceptions to energy issues are possible for the “North Stream”, which brings the Russian gas to Germany, but not for the “South Stream”, has led the analysts to the conclusion that the actual issue is the geo-strategic struggle between Russia and the EU. In the office of the Commissioner Oettinger, however, they explain that the exemption from the Third Energy Package was requested for the extensions to the “North Stream” which is entirely within the EU territory, i.e. for the gas pipeline “Opal” going from the Northern Germany to the border with the Czech Republic, and the pipeline “Gazelle” going through the Czech Republic to the south of Germany. In both cases, the exemption was demanded by the pipeline operator and it was obtained under special conditions and for a limited time period.
It should be borne in mind that an exemption from the Third Energy Package has also been made in the case of the gas pipeline TAP, which will supply Europe with gas through Azerbaijan, whereas it is applied to the “South Stream” retroactively. However, the European Commission does not stop pressuring the countries through which the “South Stream” should pass, primarily Bulgaria.
On the other hand, Austria has announced that it has no intention of giving up on the “South Stream”. Namely, the Memorandum on the construction of the Austrian branch of the “South Stream” was signed on 29th April, and the ceremony was attended by the director of “Gazprom” Alexey Miller and the director of OMV Gehard Roiss. Despite the call of the European Parliament to give up on the “South Stream“, “Gazprom” is determined to build the gas pipeline and they have offered to Austria a branch to Baumgarten, a gas hub near Vienna. All permits for building the gas pipeline in Austria should be obtained by the end of 2015 and the first deliveries of gas are expected in 2017.
In their statement for Tanjug, the Serbian Ministry of Energy explained that they would act the same as all other countries through which the gas pipeline passed, as well as that there was no “South Stream“ without Bulgaria. The issue of harmonizing the existing agreements shall be solved in the talks between “Gazprom” and the European Commission. Until then, Serbia will respect all its commitments. As far as the consequences we may suffer from the EU are concerned, if we do not suspend the project until the bilateral agreements that Russia concluded are reviewed, these could only be the consequences related to the EU accession process.
The Ministry reminds that, in accordance with the Cooperation Agreement concluded between Serbia and the Russian Federation, the company South Stream has been formed, which is the stakeholder in the project implementation. Currently, project documentation is being prepared and property issues are being solved, but considerable funds have not been invested so far, because the project has not reached the full stage yet.
Meanwhile, it has been announced that, during the month of June, a contractor shall be selected for the magistral gas pipeline and the Loan Agreement for the loan that “Gazprom” will give to “Srbijagas” will be verified, so that the first works could be started in July. In the light of the latest events, the Serbian Prime Minister Aleksandar Vučić said that the works on the “South Stream” were carried out just as it had been planned and that the decision on possible changes could only be made by the Government. The Minister of Foreign Affairs Ivica Dačić said that it was a national interest of Serbia to implement the construction of the “South Stream”. Earlier on, in his interview to Reuters, the Minister of Energy Aleksandar Antić said that there were no plans to postpone the construction, but that the Serbian position on this issue was not final, as Belgrade would monitor the development of the situation and make decisions accordingly.

About the Project
The gas pipeline ”South Stream” is supposed to transport the natural gas from Russia to the countries of the European Union. The project is worth 16 billion euros, and the total length of the gas pipeline is 2.380 kilometres. The maximum capacity is 63 billion cubic meters annually. The gas pipeline starts from the southern part of Russia, from the town of Anapa, along the bottom of the Black Sea to Varna in Bulgaria, from which point, as it has been envisaged, it should be divided into two branches. One branch would lead to Italy, underwater, through Greece, and the other, through Serbia and Hungary to Slovenia and Austria. The gas pipeline is considered to be a Russian project, but the fact that is often overlooked is that 50 percent of it belongs to “Gazprom”, 15 percent to Germany, 10 percent to France, whereas Italy has a 25 percent share.

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