Russian Seeking to Revive South Stream Pipeline Project

Over the past month, Gazprom has been making subtle efforts to restore key aspects of the previously cancelled South Stream pipeline project, signing roadmap agreements with Bulgaria, Serbia and Hungary.  The Russian energy major and Austria’s OMV are also reportedly in talks for its inclusion in this prospective project.

The newly proposed framework would have a lower capacity than what was originally planned for South Stream, but would allow Moscow to increase its gas supply to the Balkans and Southern Europe.  Support within the European Commission (EC) for the Nord Stream 2 pipeline puts the organization in a difficult position politically to mount another pressure campaign to kill the pipeline a second time.  Western European backers of Nord Stream 2, even prior to news of a potentially revived South Stream, were already accused of having a double-standard on Russian gas projects.

Gazprom has been sowing the seeds for a revived South Stream across Eastern Europe for a number of months.  Its gas deliveries to Serbia are up by 42.2% (helping Russia’s case for capacity increases).  On June 3, Gazprom signed a memorandum to expand Serbia’s Banatski Dvor gas storage facility (which services Serbia, Hungary as well as Bosnia and Herzegovina and which also played a role in the initial South Stream design).  And, more broadly, a number of discussions have been taking place with the effected countries to gauge interest levels.

Moscow has been pursuing a number of options through which it can increase its gas supplies to Southern Europe in recent months, but the path and constituent parts of South Stream have long been a strategic prize for Moscow.  Beyond the purely energy security concerns held by the EU over its original configuration, however, were also numerous reports of Russia seeking to leverage the project as a means to spread influence, including via illicit activity, in the effected countries.  Cheap gas, major construction projects and transit revenues all play a role facilitating greater Russian influence as a byproduct of this project.

If a revived South Stream pipeline is added to Russia’s list of energy projects, these concerns would surely emerge once again.