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Cancellation of South Stream, “Summer Package” and Energy Union

On 14 January 2015, Maros Šefčovič, Vice President of the European Commission for Energy Union, visited Moscow by mutual agreement to negotiate relevant issues in energy cooperation. Last year, the Russia-EU energy dialogue was suspended by the European Commission. At the meeting, Russian Energy Minister Alexander Novak confirmed to Vice-President Šefčovič that the South Stream project would no longer be pursued by Russia amid lack of support from the EU.

In December 2014, Russia made a decision to construct a new gas pipeline route across Turkey, with a hub on the border between Turkey and Greece. Projected annual gas supply to this hub is approximately 63 billion cubic meters (bcm). Gazprom is currently taking steps to deliver this project jointly with its Turkish partners, which is believed to be in full compliance with European regulations and aims to transport volumes redirected from the Ukrainian network. Responsibility for an alternative gas supply route for Russian gas to Europe rests with the EU. Gazprom CEO Alexey Miller urged the EU to put promptly in place the necessary infrastructure from the Turkish-Greek border, otherwise the gas volumes might find their way to other markets.

In other developments, the “Winter Package” – a deal brokered by former European Commissioner for Energy Günther Oettinger between Russia and Ukraine – is set to expire on 21 March 2015. The European Commission consequently put forward to Russian Energy Minister Novak the possibility to renew Russia-Ukraine agreements on gas supply in a similar format to the so-called “Summer Package” from April 2015. Novak countered that Russia may consider discounts on Ukrainian gas purchases for the Summer Package so long as Ukraine settles all outstanding bills.

Meanwhile, on his visit to Brussels on 29-30 January 2015, Ukraine’s Deputy Minister for Energy and Coal Ihor Didenko emphasised the importance of EU investment into the Ukrainian gas transportation system, as well as inviting European companies to use underground gas storage facilities in Ukraine.

Finally, Vice-President Šefčovič will in early 2015 present a proposal concerning the organisational structure for a High Level Working Group, consisting of representatives from the Member States of Central Eastern Europe and South-East Europe and mandated to investigate the interconnection of European markets and the diversification of gas supplies. These are key objectives of the future Energy Union – a priority for the new Commission. The first meeting of the High Level Working Group is scheduled to take place on 9th February 2015 in Sofia.

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