Russia to abandon South Stream gas pipeline

President Vladimir Putin said on Monday that Russia would stop construction of the South Stream gas pipeline, shelving a strategically important project that Moscow was counting on to cement its influence in south-eastern Europe.

The project would have brought Russian gas to Bulgaria under the Black Sea, bypassing Ukraine.  But the European Commission has refused to give Gazprom the exemption it would need to operate the pipeline at full capacity, viewing it as a potential further tool for the Kremlin to exert economic control over southern and eastern Europe.

South Stream is so far the biggest casualty of the stand-off between Russia and Europe over Moscow’s military involvement in Ukraine.  The South Stream decision comes as Russia turns East, working furiously to build the infrastructure to sell its gas to other markets, especially China.

Mr Putin has granted Turkey a 6 per cent price cut on Russian gas from January 1.  Russia will also increase supplies, making Turkey heavily reliant on Russian natural gas.

In contrast to Turkey’s move, the EU has been taking measures since 2010 to reduce its dependence on Russian gas.  With the events in Ukraine, European Energy Security is no longer simply about bypassing Ukraine as the key transit state for Russian gas.  The EU also wants “diversification of source of supply”.

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