South Stream Construction Halted

When the South Stream gas pipeline is finished Russia will through that pipeline be able to supply Europe with 15% of its natural gas needs. The line starts in Russia, will flow under the Black Sea and hit land in Northern Bulgaria, where it will then travel to Serbia, Through Hungary and Slovenia and thence into Italy. Gazprom hopes to own the pipeline and have paid for the construction thus far, but the European Union is uncomfortable with Gazprom owning 100% and seek to restrict its ownership to 50%. 

The EU has forced Bulgaria to halt construction of South Stream while the issues with Gazprom’s ownership are being resolved and now Serbia finds that it cannot construct its part of the pipeline while there is so much uncertainty with the project.

The point of South Stream was to avoid Ukraine as a place where European gas supplies from Russia are passing.

One effect of the pipeline construction being halted is that the bargaining position of Ukraine becomes stronger. There are disputes between Russia and the Ukraine over natural gas prices and discounts. The South Stream would mean a significant portion of Russian gas could flow into Europe without either Russia turning off the tap of gas flowing into the Ukraine or the Ukraine turning off the tap of gas flowing into Europe.

A third of Europe’s gas is supplied by Russia, so the European Union’s action might have a serious impact on energy supplies in the European Union. It has never been possible to divorce energy from politics. The collateral damage comprises those who need natural gas or will find it cheaper than using existing energy sources and those who will lose their employment as a result of the decision to halt construction.

 

One Response

  1. When Messr’s Rothschild’s buys the remaining shares the pipeline will be done in record time.

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