Putin urges acceleration of South Stream

[December 30, 2011]  MOSCOW (AP) -- Prime Minister Vladimir Putin on Friday instructed gas giant Gazprom to speed up the construction of a gas pipeline under the Black Sea in an apparent attempt to put pressure on Ukraine, the current chief export route for Russia.

The South Stream project, co-owned by Gazprom, France's EdF, Italy's Eni and Germany's Wintershall, is meant to ship Russian natural gas to southern and eastern Europe.

The pipeline, which is expected to start operating in 2015, would ship up to 63 billion cubic meters (2 trillion cubic feet) of gas annually to Bulgaria, Serbia, Hungary, Slovenia, Austria and Italy in one leg and Croatia, Macedonia, Greece and Turkey in a second. This week, Moscow secured a key approval from Turkey to go ahead with the construction.

The 15 billion-euro South Stream is rivaling the European Union-backed Nabucco pipeline that's slated to ship gas from the Caspian region to Austria.

Putin told Gazprom CEO Alexei Miller in televised comments that "it would be advisable" to start building the pipeline at the end of next year, not in 2013.

The move is likely to put pressure on Ukraine, currently Russia's chief gas export route.

Miller also said that the $20 billion Ukraine is seeking for the pipeline is too high because it will require 2 to 8 billion euros ($2.5-10 billion).

Continuous disagreement between Moscow and Kiev, which has led to two gas wars, largely stems from Moscow striving to control, or at least manage, the export pipeline crossing Ukraine. Kiev in return is seeking lower gas prices.

Ukraine is currently paying about $400 per 1,000 cubic meters of gas, but wants to pay $250. The talks have so far failed to produce a deal and a new round is set for mid-January.

A price discount for Ukraine could amount to $9 billion for an annual shipment, Miller said Friday.

Although his order regarding South Stream seems to be aimed to push pressure on Ukraine at the upcoming gas talks, Putin still added that it expects Ukraine to remain an important gas route for Russia.

Ukraine's prime minister Mykola Azarov on Thursday threatened that his government may take Gazprom to court if Moscow doesn't agree to a lower price at the talks. It was not immediately clear, however, what could make the legal grounds of that lawsuit.

[Associated Press]

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