Russia, Greece Ink Deal on South Stream Gas Pipeline

MOSCOW, Russia Apr 29, 2008 (Dow Jones via AFP)

Greece and Russia on Tuesday signed a deal to extend the proposed Russian-Italian South Stream gas pipeline into Greek territory, boosting Moscow's presence on Europe's energy supply routes.

The deal to bring Russian gas to southern Europe was signed in the Kremlin by Greek Development Minister Christos Folias and Russian Industry and Energy Minister Viktor Khristenko.

After pumping Russian gas under the Black Sea to Bulgaria, South Stream will split into two branches, one of which will take gas northwest to Austria.

Tuesday's deal clears the way for laying a southwestern branch to Italy by allowing the "creation and exploitation of a gas pipeline on the territory of the Greek Republic."

Russian President Vladimir Putin, who agreed the terms with Greek Prime Minister Costas Caramanlis before the ceremony, said both South Stream and a proposed Russian-backed oil pipeline through Greece could only benefit Europe.

"Their aim is to significantly increase the energy security not only of the Balkans but of the entire European continent," he said, before warning critics in Europe that they should not snub Russian gas.

"The countries that are capable of supplying raw fuels in the necessary volumes at competitive prices for Europe can be counted on the fingers of one hand," he said.

Putin and Caramanlis also discussed the 280-kilometer Burgas-Alexandroupolis oil pipeline that will connect the Black Sea to the Aegean as a vital alternative route bypassing the tanker-congested Bosporus Straits.

Putin promised the technical and economic details of Burgas-Alexandroupolis should be finalized "in the near future."

"Both of these projects comply with the energy requirements not just of our country but of Europe as a whole," Caramanlis said.

Bulgaria and Hungary have already signed up to the South Stream project, which is being developed by Russia's OAO Gazprom (GAZP.RS) with Italy's Eni SpA (E).

Seen as crucial to Russia's efforts to maintain a dominant position on the European continent's gas supply, South Stream rivals the E.U.-backed Nabucco pipeline, which is aimed at reducing the bloc's dependence on Russian supplies.

Nabucco would run 3,300-kilometers through Turkey and southeastern Europe to carry gas from the Middle East and Central Asia to Europe, bypassing Russia.

European leaders have voiced concern in recent months at the bloc's dependence on Russian gas, which accounted for 46% of imports in 2005, while analysts have said South Stream undermines the feasibility of Nabucco.

Putin, however, defended Russia's right to fight for a bigger slice of the European market.

"The development of the South Stream pipeline does not mean that we are fighting any other alternative projects," Putin said. "Our proposal is the most optimal and competitive."

Copyright (c) 2008 Dow Jones & Company, Inc.

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