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06.12.2013 14:24
EU Calls for South Stream Contracts to be Re-Negotiated
Gazprom determined to carry on with construction as planned

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The bilateral agreements for the construction of the Gazprom-favoured South Stream gas pipeline – concluded between Russia, Bulgaria, Serbia, Hungary, Greece, Slovenia, Croatia and Austria – are all in breach of EU law and need to be renegotiated from scratch, the European Commission said December 4.

Speaking in the European Parliament, Klaus-Dieter Borchardt, director for energy markets at the European Commission, said the deals were in breach of EU law.

“The Commission has looked into these intergovernmental agreements and came to the conclusion that none of the agreements is in compliance with EU law," Borchardt said, as quoted by EurActiv.

"That is the reason why we have told these states that they are under the obligation, either coming from the EU treaties, or from the Energy Community treaty, that they have to ask for re-negotiation with Russia, to bring the intergovernmental agreements in line with EU law,” he added.

The development comes at a moment of heightened sensitivity in EU-Russia relations. Last week European heads of state were dismayed by the decision of Ukrainian President Viktor Yanukovych to reject the signing of a partnership agreement that would bond relations between the former Soviet state and the EU.


The Commission official highlighted at least three major issues about the deals:

First, the EU's so-called network ownership 'unbundling' rules need to be observed, he said. This means that Gazprom, which is both a producer and a supplier of gas, cannot simultaneously own production capacity and its transmission network;

Secondly, non-discriminatory access of third parties to the pipeline needs to be ensured. There cannot be an exclusive right for Gazprom to be the only shipper; and

Thirdly, the tariff structure needed to be addressed.

But even if negotiations are successful, work to accommodate South Stream with EU concerns would take time, Borchardt warned.

“Not months, maybe two years before we get there," he said.

Exemptions from unbundling obligations are not ruled out, the official said. But such a window of opportunity would open up only when gas capacities would start to be allocated to the different segments of the pipeline, he explained, adding that such a moment would take place only in the remote future.

“It will not be an easy task; it needs a lot of mutual understanding, maybe also some new ideas that are not yet discussed. But I have to say in all openness and frankness that the South Stream pipeline will not operate on the territory of the EU if it is not in compliance of our energy law,” Borchardt stressed.

Meanwhile Gazprom maintained a firm position regarding the pipeline's future.

"South Stream will go on according to plan and in compliance with all national and international legal requirements. We regret that the EU expressed its concerns at such a late stage after construction works have been started", a press release from Gazprom release today read.

The Russian company insists that large scale investments like South Stream are usualy supported by such bilateral agreements.

TAGS: Gazprom | South Stream | EU | gas | pipeline | bilateral agreements | EU law 

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