Monday, March 13, 2017

EU-Gazprom deal clears Bulgaria of South Stream cancellation claims -

The (now terminated) South Stream pipeline
13 March 2017
Georgi Gotev

The Commission published Gazprom’s commitments on Monday (13 March) to end a five-year antitrust case and avoid fines heavy fines. As part of the package, Gazprom agreed not to seek any damages from its Bulgarian partners following the termination of South Stream.

In what appears to be a huge deal reached behind closed doors, the Commission agreed with the Russian gas export monopoly to remove restrictions for EU countries from Southern and Eastern Europe to re-sell Russian gas across borders. Until now, bilateral contracts didn’t allow such trade, and in the case of Bulgaria, the implementation of the gas interconnector with Greece was hampered by certain provisions of the Gazprom contracts with both countries.
The deal needs to be approved in seven weeks’ time, and all interested parties – governments and companies – are invited to submit comments. Only then is the executive prepared to make the agreement binding. IfGazprom breaks its commitments, it can be fined up to 10% of its global turnover.

On a visit to Turkey on 1 December 2014, Russian President Vladimir Putin said South Stream was over, and that the 63 billion cubic metres per year of gas would be shipped to Turkey instead of Bulgaria, which according to the Russian leader, had blocked the project.

South Stream was a Russian-sponsored project. As initially planned, the pipeline would run under the Black Sea to Bulgaria, and continue through Serbia with two branches to Bosnia and Herzegovina and to Croatia.

The European Commission put pressure on Bulgaria to freeze South Stream, citing breaches of EU law in the intergovernmental agreement for the construction of the pipeline.

In the meantime, Russia replaced South Stream with Turkish Stream (also known as Turk Stream), intended to bring Russian gas to the European territory of Turkey, under the Black Sea. It is unclear what route the gas would take beyond Turkey, but Gazprom has indicated it plans to use the Trans Adriatic Pipeline (TAP), part of the Southern Gas Corridor, to transport its gas to Southern Italy via Greece and Albania, under the Adriatic Sea.

Bulgaria seems to regret having lost the South Stream project and the income from the transit fees. Russia keeps floating the idea of a “second pipe” reaching the Bulgarian Black Sea shore, but nothing has been decided yet. asked the Competition Commissioner Margrethe Vestager if the decision to clear Bulgaria from cancellation claims could be interpreted to mean that the Commission is giving approval to a new version of the project.

“That’s another issue,” Vestager replied, adding that the agreement was not about the future of South Stream.

Experts told EURACTIV that the agreement between Gazprom and the Bulgarian Energy Holding (BEH) to set up the South Stream joint venture company contained the commitment that there could be a $70-million claim in case of cancellation.

“The commitment clearly specifies that the Russian side cannot claim back those 70 million, but also that it cannot it cannot claim any other damages relating to the cancellation of the South Stream project,” the expert said.

EURACTIV asked what was going to happen to the pipes destined for the offshore section of South Stream, which are stored in the Bulgarian ports of Burgas and Varna.

The proposal doesn’t deal with the ownership of the pipes, the expert said.