South Stream could stop Serbia joining EU, energy chief says

BRUSSELS - Serbia has defied EU calls to change the terms of its gas pipeline deal with Russia, but a European energy chief says it “cannot” join the EU unless it does so.

The European Commission in its annual enlargement report on Wednesday (8 October) repeated warnings to Belgrade “not [to] commence work” on the South Stream pipeline until it renegotiates its agreement with Russia.

It noted that the current terms violate EU laws designed to stop monopolies, such as Russia’s Gazprom, from inflating prices.

But Serbian foreign minister Ivica Dacic on a visit to Moscow on Tuesday said: "Everything is fine with South Stream. We are ready to build it. All preparatory works are running as planned”.

A Dacic spokeswoman on Wednesday also told EUobserver the South Stream dispute should be settled between the EU and Russia instead of involving individual South Stream countries.

“We believe that a satisfactory solution shall be reached through talks between the EU and the Russian Federation”, she said.

She noted the issue is “important” for Serbia’s EU accession prospects, but added that “it shall not directly, but only indirectly impact our accession process”.

She also put the value of the pipeline on a par with EU membership: “The South Stream project is of great importance for the Serbian economy, just as our co-operation with the European Union is”.

The EU earlier this year used the same legal argument to make Bulgaria stop construction.

But a Dutch-based spokesman for the South Stream consortium told this website that work on the offshore part of the project, from Anapa on Russia’s Black Sea coast to Varna in Bulgaria, is going ahead anyway.

“The production of pipes in Germany and Russia has been ongoing since April and over 9,000 pipes are stored in Burgas and Varna. Early September, we will also started welding pipes together on board a vessel moored at the Port of Burgas, in preparation for pipe laying in Russian waters later this year”, he said.

“We are confident that South Stream will be implemented and aim for the first offshore pipeline to be in operation by the end of 2015”.

Obligations mount up

EU officials note that aside from South Stream itself, Serbia, as a member of the European Energy Community (EEC), an EU-linked institution in Vienna, is obliged to transpose the EU anti-monopoly laws into national legislation by 1 January 2015.

For his part, Janez Kopac, the EEC director, told EUobserver that if it does not, the EEC “may initiate a dispute settlement procedure”.

He recalled that a recent dispute involving Bosnia ended in the EU freezing some of its pre-accession funds.

He added: “The EEC secretariat has repeatedly called on Serbia to amend the South Stream agreement and bring it in compliance with the energy acquis [EU laws]. It should be clear from the beginning that Serbia cannot accede to the EU without bringing this agreement into compliance”.

The South Stream row comes amid wider concerns that Serbia is drifting back toward Russia despite recent progress in its EU entry bid.

The EU enlargement report also said: “The commission underlines the importance of enlargement countries progressively aligning with the EU’s foreign policy positions”.

But MEPs at a European Parliament hearing on Wednesday noted that Serbia abstained from a recent UN vote on the non-recognition of Russia’s annexation of Crimea and has declined to join the EU’s Russia sanctions regime.

Strategic importance

Meanwhile, South Stream has acquired extra strategic importance in the context of Russia’s war on Ukraine.

It harms Ukraine by bypassing its gas transit network and gives Russia more political leverage in the EU by increasing energy dependency.

The EU institutions are sponsoring a competing project - the TAP pipeline from the Caspian Sea via Turkey to Europe - but TAP preparations are going more slowly.

Asked if the Russia-Ukraine crisis has had an impact on the project, a spokeswoman for the Vienna-based TAP consortium said: “TAP supports the EU’s energy security needs by opening a new gas transportation route able to bring new sources of gas to Europe”.