Yesterday, the first of December, the Russian President Putin announced the termination of the pipeline project „South Stream“. Russia blames the EU blockade mentality as a reason for this decision.
The project “South Stream” was a co-operation between the Russian energy giant Gazprom and several states in South-East Europe. The aim of the estimated twenty billion expensive investment in pipelines was a diversification of transportation ways from Russia to East- and South Europe. Especially the monopoly position of the transit countries Ukraine and Belarus were intended to be minimized. Nearly 1000 kilometre of the pipeline would have been constructed in the Black See, connecting Russia and Bulgaria.
2009 the pipeline project was concluded between the Russian Energy monopoly Gazprom and the Bulgarian Energy Holding and the construction began in South Russia. In the same year, the European Union adopted the “Third Energy Package” which, among others, had the aim of a separation of energy-generation and energy–transmission.
The EU-Commission announced doubts about the “South Stream” with regards to the mentioned split between production and transmission and feared a breach since Gazprom possibly would be supplier and distributor of energy. Furthermore the former Energy Commissioner Oettinger feared, that the project could sideline the Ukraine since it would create an alternative route for European energy supply outside the Ukraine. The Commission started legal procedures against Bulgaria, EU member state since 2007, which promised to freeze the realisation of “South Stream” until the EU would give its consent. This decision consequently led to irritation and negative perception in Russia.
More recently, while the Ukraine crisis and annexation of the Crimea led to a dramatic deterioration of EU-Russian relations, Russia increasingly accused the EU of blocking the realisation of the project due to political reasons.
Yesterday at a visit in Turkey, Putin declared that Russia would drop the project due to the opposition of the European Union. This decision in turn led to irritation in transit country Serbia, where constructions already have started.
On the long-term, the cancellation of South Stream might harm both, European consumer countries and the Russian economy due to less energy exportation to Southern and Eastern Europe.