Ukraine Positions Itself as Alternative to South Stream
Ukraine is trying to convince Russia to drop the South Stream pipeline project and instead upgrade the Ukrainian gas transport system.
Ukrainian Prime Minister Mykola Azarov said that upgrade would cost much less than South Stream but deliver the same results.
"As for the South Stream project, we have an alternative which we will offer to our Russian partners. The issue is about modernizing our southern gas pipelines, which will raise their capacity to the one planned for South Stream," Azarov told Russian newspaper Wsgljad. "This project will cost $1 billion, unlike the $25 billion for South Stream."
The pipeline will account for approximately 35% of Russian natural gas supplies to Europe. and is backed by Russia's Gazprom, France's Electricite de France (EdF) and Italy’s Eni.
South Stream is a rival project to the EU-backed Nabucco pipeline, which is also intended to transport Caspian and Central Asian gas to Europe, but bypassing Russia.
Expected to commence operating in late 2015, South Stream will start from near the Russian port of Novorosiysk on the Black Sea coast to Bulgarian port of Varna with an underwater section of 900 km (see map )
That Ukraine would like to see South Stream stopped is no surprise: The pipeline, to be unveiled in December 2015, South Stream is part of Russia's efforts to cut dependence on transit nations, particularly Ukraine, Belarus and Turkey.
Around 80 percent of Russia's gas exports to Europe are sent through Ukrainian pipelines. In the past years, constant confrontation between Kiev and the Kremlin led to several gas price rows that temporarily halted energy flows to Europe, damaging Ukraine's reputation as a reliable transit country.
In the aftermath of the first gas conflict, two major Russian-European gas pipeline projects -- South Stream as well as Nord Stream under the Baltic Sea -- were jump-started in a bid to bypass Ukraine and deliver Russian gas unilaterally to Europe.
Yet the tide has turned in Russian-Ukrainian ties. Viktor Yanukovych, a pro-Russian figure, took over as president of Ukraine early this year, and relations have since considerably warmed.
Yanukovych hopes that the improving relations help bring about new deals to modernize the Ukrainian gas transport system. Ukraine doesn't have the money to do it alone, as its economy is in shambles and the national budget overstretched. If South Stream is built, then modernizing the pipelines wouldn't make too much sense for Russia, which could shoot most of its gas exports through South Stream and Nord Stream.
The proposal may seem more plausible with Gazprom and Naftogaz Ukrainy, the Ukraine state-run energy company, agreeing to move toward a complete merger after they create a joint venture. This would in effect led to Russian control over the Ukrainian pipelines transiting gas westward.
Ukraine will try everything in its power to maintain its role as a transit country, and that will include trying to convince Russia to drop South Stream.
Yet the Russians are likely to press ahead -- also because Europe has launched Nabucco, a competitor pipeline.
The proposed 2,500-mile pipeline would stretch from Azerbaijan to Austria via Turkey and is aimed at breaking the Russian domination of gas import routes to Europe.
Source: UPI and NGFE archives