Wednesday, June 25, 2014

Vladimirovich Scores Again

Some of the assets in Ukraine the Kremlin considers worth fighting for are the gas pipelines that cross the country to deliver gas in Europe. The Russian state company, Gazprom, owns the gas and right now Kiev cannot afford to buy any of it. It already has a $3bn outstanding gas bill that Russia wants paid in full. Ukraine can do little to stop the flow of gas without antagonizing its new NATO friends like Germany.  The real star of the show is not the Soyuz or Brotherhood lines but the South Stream [map] built to specifically bypass Ukraine and as an alternative to the western sponsored Nabucco line crossing Turkey which has now been abandoned. The South Stream project was announced in 2007 by Italian energy company Eni's Paolo Scaroni and Gazprom Vice-Chairman Alexander Medvedev.  Construction started in December 2012 and is expected to cost $40 billion.

Bulgaria is a key transit point where the South Stream comes ashore at Varna. Bulgaria has a dysfunctional relationship with Russia, a legacy of the Soviet empire, so it was not entirely surprising that after talking with US senators, Bulgarian prime minister Plamen Oresharski halted the pipeline's construction. He told reporters that "further proceedings" would be held after consultation with Brussels. Brussels wants the project frozen while it takes time to consider whether the project violates its competition regulations. President Putin is aware of rude western efforts to disrupt the contracts for the South Stream project. He calls the efforts "ordinary competitive struggle" because the US wants to supply Europe with liquified gas.  The United States views the South Stream as a strategic liability since it encourages European dependence on Russian gas.  Putin held talks with Austria's President Heinz Fischer in Vienna this week. Austria, which is the western terminus of the South Stream and possesses a triple A credit rating, defied the EU and gave final approval to the project's Austrian segment on Tuesday. Gooooooooooooooal!!!