A multi-billion dollar South Stream pipeline project to supply gas to southern Europe has been scrapped by Russia because of EU criticism.
The Gazprom-led project was due to provide 63 billion cubic metres (bcm) of natural gas a year from Russia via the Black Sea, more than 10 per cent of the current demand, without crossing Ukraine. The $40 billion planned project drew criticism from the EU over the conflict in Ukraine, which led to Brussels freezing its approval.
Carlos Pascual, a fellow at Columbia University's Centre on Global Energy Policy, said that the scrapping of South Stream reflects internal Russian pressure about where it will invest limited resources at a time when sanctions are having an impact.
The announcement was made during a visit by Russian President Vladimir Putin and Gazprom’s Alexei Miller to Turkey. The purpose of their visit was to discuss the prospect of building an alternative gas-hub project at the Turkey-Greece border, with a promise of considerable energy price discounts. According to Miller, Turkey was seeking a 15 per cent discount.
"I don't think Putin is bluffing. I think he's really adapting to a fundamentally new geopolitical situation in Europe," said Pierre Noel, fellow for economic and energy security for International Institute for Strategic Studies.
The project was of major importance in terms of energy security and economy for countries such as Hungary, Austria, Serbia and Bulgaria. However, Brussels raised concerns over Moscow increasingly exerting undue influence on Europe’s energy supply.