Russian President Vladimir Putin has announced that the $50bn (£32bn) South Stream project has been cancelled- revelling mixed emotions from member countries of the EU.
The South Stream project concerned plans to build a gas pipeline under the Black Sea, running to southern and central Europe, providing another transit route for Russian gas giant Gazprom. However since its proposal, the EU has shown opposition based on concern over Gazprom, which already provides 30% of Europe’s gas, having their own gas pipeline.
It is exactly this opposition that Vladimir has claimed as the reasoning for his recent announcement, stating “if Europe does not want to carry out the (South Stream) project, then it will not be carried out, we are now going to focus our energy resources in other directions”- including the possibility of constructing a gas hub on the Turkish-Greek border, as well as a pipeline in China.
However Martin Valdimirov, an energy specialist at the Centre for the Study of Democracy in Sofia, has suggested that this announcement may in fact be a bluff intended to encourage European commission to support the project. On the other hand, he also acknowledges that it may be simply because South Stream “is too big a burden” for Gazprom to take on at this time. Andrii Tiurin of Ukrainian nuclear company Energoatom has interpreted the cancellation as being “made for economic reasons, disguised behind a political explanation”.
Several European governments have looked at this decision with dismay, including Hungary and Serbia. Within the Bulgarian government fears have sparked that this decision will cost their economy millions of dollars in lost revenue, with estimates from former energy minister Roumen Ovcharov of around $600m (£384m) per annum.
However those in Ukraine, who were cut off from Russia’s gas supply back in June following conflict, were relieved by Putin’s announcement. As they were concerned this new pipeline could increase Russia’s political influence over Europe, which could be detrimental to the Ukrainian government.
While Europe will remain dependent on Russian gas for a long time, abandoning this project may encourage progress towards a common European energy policy supporting a mix of energy sources, which will at least allow for negotiation with Gazprom for lower prices.
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