South Stream Progress Improbable Under EU Pressure
BMI View : Bulgaria's halt of works on the South Stream pipeline validates our expectation that the Ukraine-Russia standoff would impede further progress on the project. We maintain that the EU's stance will prevent advancements on the pipeline, rendering the originally planned start-up date of 2015 untenable.
Bulgaria has halted work on the South Stream pipeline following political pressure from the European Commission (EC) and the United States. The EC had asked the Bulgarian government to suspend work on the South Stream gas pipeline, threatening infringement proceedings, on the basis that it violates EU law. Bulgaria started work on the pipeline in October 2013, eager to reduce its dependency on gas piped through the Ukrainian pipelines. The country was also keen to earn the transit fee.
This development supports our view that the Ukraine-Russia standoff and deteriorating relations with the West would delay Russian-sponsored projects, most notably Gazprom's flagship European project, South Stream. We had specifically the pipeline would likely be obstructed from further progress in the short term. This is a symbolic penalisation by Europe for Russia's involvement in Ukraine and an attempt to prevent a further increase of EU dependence on Russian gas (see, 'Far Reaching Implications From Ukraine Standoff,' March 5).
|Continued High Dependency On Russian Gas|
|Russian - European Gas Trade Data|