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Moscow Times
October 23, 2009
South Stream May Be First to Open
By Anatoly Medetsky.

Russia may start gas supplies to Europe through a Black Sea pipeline before westbound deliveries will flow under the Baltic Sea, Prime Minister Vladimir Putin said in a surprise announcement Thursday.

Gazprom and Italian energy company Eni have planned to complete the South Stream pipeline under the Black Sea by the end of 2014, three years after Gazprom and its other foreign partners want to start the Baltic Sea pipeline, Nord Stream.

Putin’s statement that the southern project ­ worth at least 19 billion euros ($28 billion) ­ may move ahead of schedule comes less than three months before presidential elections in Ukraine, which could end up losing its key transit role and substantial revenues because of the new pipeline.

Moscow has blamed Ukrainian President Viktor Yushchenko for derailing bilateral ties and has laid hopes for improvement on his replacement.

The South Stream “has a good chance of being implemented earlier than a similar project in the Baltics, Nord Stream,” Putin said in a meeting with his Italian counterpart Silvio Berlusconi in St. Petersburg.

Later in the day, the two leaders held a conference call with Turkish Prime Minister Recep Tayyip Erdogan in which Putin said Berlusconi was the driving force behind the project’s acceleration.

“Silvio sets a very difficult task for our companies regarding the South Stream,” Putin said. “He says the South Stream must be constructed sooner that the Nord Stream.”

Berlusconi stepped in to say, “It’s a challenge that we must accept.”

Putin continued, saying, “We can, in fact, accept it.”

A stretch of the South Stream will pass through Turkish waters ­ a snub to Ukraine whose waters were the alternative option ­ and requires Turkey’s consent. Turkey has given permission to Gazprom and Eni to start a feasibility study in the area.

Russia and Ukraine frequently haggle over gas trade, suspending transit to Europe in the process, most recently for three weeks in January.

Putin, Berlusconi and Erdogan gave no indication of exactly when South Stream, which could carry up to 63 billion cubic meters of gas from Russia to Bulgaria and on to southeastern Europe, could start operating.

Calls to Gazprom spokesman Sergei Kupriyanov went unanswered Thursday afternoon. Gazprom issued a statement Thursday, saying its chief Alexei Miller met with Eni chief Paolo Scaroni earlier in the day to discuss the southern pipeline as a way to increase Europe’s energy security.

Irina Vasilyeva, a spokeswoman for Nord Stream AG, the company set up to build the Baltic pipeline, said it was on schedule to start construction next year and complete it by the end of 2011.

Alexander Nazarov, a gas analyst at Metropol, said he thought Nord Stream would start operating in 2014. There is potential to bring the South Stream on line in 2013, he said.

Even so, he said Putin’s announcement about the South Stream had more to do with the election campaign in Ukraine because it would likely stir debate there about the sour bilateral relations.

In the conference call, gas wasn’t the first thing on Berlusconi’s mind. When he had a chance to speak, he urged Erdogan to congratulate him on the victory of Italian football club Milan over Spanish club Real in a Champions League match recently. Later on, Putin mentioned that it was a Turkish player that scored a goal for Russia’s Rubin in a game with Spain’s Barcelona.

In other meetings in St. Petersburg, Berlusconi said he would buy the first UAZ off-road vehicle that automaker Sollers produces in its new Far East plant, Putin’s spokesman Dmitry Peskov said in his account of the meeting between Berlusconi, Putin and the Sollers chief executive. The plant is expected to start work in December.

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