With Help from Italy, Gazprom Announces the South Stream Pipeline


Medvedev closed the Gazprom-ENI deal, but Sergei Lavrov continues to get the spotlight. Here he speaks at the 15th Summit of Black Sea Economic Cooperation Organisation (BSEC) in Istanbul June 25, 2007. REUTERS/Fatih Saribas (TURKEY)

In its never ending quest for access to Russia’s energy resources, the Italian firm ENI has announced the signing of a MoU with Gazprom to build a nearly 600-mile natural gas pipeline under the Black Sea, which is expected to transport 30 billion cubic meters, or 1.05 trillion cubic feet, of natural gas annually and will cost upwards of 10 billion euros. The pipeline, which will be called South Stream, will make Europe even more reliant on Russian energy supplies, and allow Gazprom a great degree of direct access to European consumers – challenging the “unbundling” concerns of EU competition authorities who want to keep supply and distribution companies separated. In response to these concerns over market failure and monopoly control of European energy by a foreign government, Gazprom has been characteristically confident and cheeky: “If principles of communism have come to the EU, someone should let us know,” Deputy Chief Executive Alexander Medvedev said. Similar to its counterpart deal with German firms E.ON and BASF to bring gas to Europe while circumventing politically inconvenient transit countries (the NordStream), ENI and the Italian government have been instrumental in assisting Gazprom’s plan to put an end to Turkey’s control over critical energy transit routes to Europe. Let’s not forget that at the behest of the Kremlin, ENI became one of the first foreign companies to own assets stolen from Yukos – obtained in an auction process so fraught with irregularity that any sensible company wouldn’t touch the properties with a ten-foot pole. These seemingly inadvisable actions are made possible but Gazprom’s irresistible promises to turn Italy (or Germany, or Hungary, or Austria, or Bulgaria) into a gas supply hub, promising to build storage facilities that would give each country regional clout. Obviously, not everybody can be a transit hub, and it’s high time that Europeans began paying attention what Gazprom is promising to so many different partners and begin negotiating jointly. gaschart0625.gif From the WSJ