July 7, 2014
As we remarked two weeks ago, when observing the recent developments surrounding the suddenly all-important South Stream gas pipeline bypassing Ukraine entirely, and instead traversing the Black Sea before crossing Bulgaria, Serbia, Hungary and terminating in the Austrian central European gas hub of Baumgarten, we said that all of Europe is suddenly focused on if and how Russia will make headway with a project that may be the most important one for not only Europe’s energy future but the impact Russia will continue to have over Germany et al. And of course, Ukraine. Because should Russia find a way to completely bypass Kiev as a traditional transit hub for Russian gas, it would make the country, and its ongoing civil war, completely irrelevant not only for Russia, but worse, for Europe, the IMF, and Ukraine’s staunch western “supporters and allies” as well.
Showing just how Europe perceives the Russian “South Stream” threat was a comment from a recent NYT article, in which Günther Oettinger, Europe’s top energy official, was quoted as saying that the Ukraine crisis “has slowed down our progress on South Stream considerably… We can’t just give in to the Russians every time.” Alas, since the Russians control the all important gas, Europe has zero choice.
This explains why even as the western media finally remembered over the weekend there was a Ukraine civil war going on following an advance by the Kiev army to retake some rebel strongholds in the Donbas region, with some wondering what if anything Putin would do in retaliation, what Putin, or rather his envoy Sergei Lavrov were actually doing, was completely ignoring the Ukraine situation (where the West has long since conceded the loss of Crimea to the Kremlin) and instead focusing on securing the successful launch of the South Stream (remember: the second South Stream goes online, Ukraine becomes irrelevant). And since Russia already signed another historic agreement with Austria in June, which positioned the AAA-country (with some surprising emerging bank troubles subsequently) squarely against its fellow European peers, it was the turn of the other South Stream countries, namely Bulgaria.
As Reuters reported, all construction timelines for the South Stream pipeline are on track and the European Union should restart talks about the project, Russian Foreign Minister Sergei Lavrov said on a visit to Bulgaria on Monday.
Bulgaria has been an enthusiastic supporter of the Russian-backed project, whose construction has stoked tensions between the West and Moscow, especially in the wake of Russia’s annexation of Crimea.
But Prime Minister Plamen Oresharski’s government suspended work last month on its section of the pipeline at the behest of Brussels, pending a ruling on whether the project violates EU law.
Which maybe sheds some light on why in June Bulgaria also experienced the biggest bank run in 17 years, culminating with the nationalization of the 4th largest bank, and also led to the president announcing his early resignation.
So in the Bulgarian power vacuum, the domestic foreign minister Kristian Vigenin said that the “pipeline is of interest to EU, its construction must comply with European laws” during a briefing with his Russian counterpart, Sergei Lavrov. He also said that Bulgaria seeks a quick resumption of South Stream, something which means Europe will have to try harder in its try to prevent a pipeline bypassing its now very substantial Ukraine investment.
Lavrov added that South Stream agreements were signed long ago, before EU adopted unbundling legislation; such laws can’t be retroactively applied. The Russian foreign minister said Russia expects EU to apply single standards to all pipelines.
And since it is not just Bulgaria but Serbia, we also got this:
And from Itar-Tass:
Gas can run through Kosovo by the South Stream pipeline, according to materials, timed to Serbian Prime Minister Aleksandar Vucic’s visit to Russia.
“An issue is being studied to create a network in Kosovo based on long-term contracts on Russian natural gas supplies,” the materials say.
Two branches are planning to be built – to Serbian Republic and Croatia, the materials say.
At present, Russia’s-led South Stream gas branch is expected to run through Macedonia. The Serbian leadership upheld this idea.
South Stream is Gazprom’s global infrastructure project for the construction of a gas pipeline that will run via the bottom of the Black Sea to the countries of Southern and Central Europe with an aim to diversify routes for exporting natural gas and exclude transit risks. The ground section of the South Stream pipeline will run across Bulgaria, Serbia, Hungary, Slovenia, and Austria. The designed capacity of the pipeline is 63 billion cubic metres. The pipeline is planned to be commissioned in late 2015.
In other words, the great cold war 2.0 fight for Russian sphere of influence in Eastern Europe is on. Because while on one hand we reported that during the weekend, it was none other than France which vocally came out against US Dollar hegemony and thus was forced to gravitate toward the Eurasian (China/Russian) camp, it is the events in Eastern Europe in the next several months that will define European energy geopolitics for the decades to come.
Look for many more fireworks in Bulgaria and the other South Stream countries over the coming weeks as the fate of the South Stream is determined behind the scenes.