South Stream puts Serbia in conflict with EU

18/07/2014

Belgrade says it hopes to join the EU, but will not reconsider its participation in Russia's South Stream project.

By Ivana Jovanovic for Southeast European Times in Belgrade -- 18/07/14

photo

Serbia says it plans to sign the agreement with Russia for the South Stream pipeline, despite warnings from the European Commission that the project is incompatible with EU standards. [AFP]

With the decision by Bulgaria to suspend construction of the South Stream natural gas pipeline, there is more pressure on Serbia, which is balancing its longstanding ties with Russia against its desire to join the European Union.

"The Serbian situation is the most difficult because it 'paid ' the entrance to the pipeline by giving to Gazprom low prices for NIS (Naftna Industrija Serbia – Oil Company of Serbia) and Banatski Dvor (and underground gas storage in Vojvodina)," Jelena Milic, director of the Centre for Euro-Atlantic Studies for Belgrade, told SETimes.

"It is not regulated by the energy agreement with Russia what will happen if Russia gives up the project or if it will not be able to realise its obligations. Serbia counts on incomes of transit and to pay back its debts to Russia," Milic said.

Following the instructions of the European Commission (EC), Bulgaria froze construction plans for South Stream, a 2,380-kilometre long pipeline that would transport Russian gas to Eastern Europe and beyond, bypassing Ukraine and putting additional financial pressure on Kiev in its dispute with the Kremlin.

Bulgaria ended its participation after the EU said the project does not comply with its competition and energy legislation. But Serbia still plans to participate in the project.

Prime Minister Aleksandar Vucic, who met with Russia Prime Minister Dimitry Medvedev in Moscow on July 7th, said the two countries plan to sign a South Stream agreement soon.

"South Stream is a priority project for Russia, and this has become evident in the context of developments in Ukraine," Medvedev said.

Milic told SETimes that it is important for Serbia to sync its legislation with the EU as well as implement its Third Energy Package, with which South Stream is in conflict.

"The Third Energy Package requires separate ownership of transporter and producer (in this case Gazprom is both) which protects from the monopoly and, overall, which is good for citizens," Milic said.

"Serbia should follow EU instructions and manage the issue in co-ordination with the Union. The less bad scenario for Serbia is agreement between the EU and Russia in which it should participate at the side of the EU," Milic said.

Vucic said that Serbia would like to become a member of the European Union.

"I have never concealed that Serbia wants to become a part of the EU, but at the difficult moment Serbia does not want to damage good, friendly relations with Russia," he said.

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Russia is also attempting to restore its agreement with Bulgaria, which was signed in 2008.

Ilian Vassilev, managing partner at Innovative Energy, a professional consultancy firm, and former ambassador to the Russian Federation, said the suspension is a natural development in a process that is primarily driven at the EU-Russia level.

"Until the larger frame of energy and political (Ukrainian crisis) is cleared there is little to no chance for bilateral arrangements between an EU member state and Russia. Attempts to circumvent the EC primacy in the process and focus on the bilateral format, playing on nationalist and sovereignty sensitive public tunes in the South Stream route countries, as the Russians are trying, are doomed," Vassilev told SETimes.

How should Serbia's desire to enter the European Union affect its participation in the South Stream project? Add your thoughts in the comment space below.

This content was commissioned for SETimes.com.
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