Russia riles

Europe Fuming at Gas Pipeline Loss

gas_
Cut off in its prime.
  • Why it matters

    Why it matters

    Russia’s withdrawal from the €40 billion ($50 billion) South Stream pipeline has infuriated European companies involved in its construction, but it may benefit a planned E.U.-backed gas project in the Adriatic.

  • Facts

    Facts

    • South Stream was designed to supply southern and central Europe with Russian gas.
    • Russia blames the E.U. for the cancellation.
    • German firm Wintershall had invested €100 million ($124 million) in the project. Italy’s ENI and France’s EDF were also involved.
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    Audio

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The surprise announcement was no doubt made with a certain amount of smug satisfaction.

On Monday, Russian President Vladimir Putin and Alexey Miller, the boss of the country’s state gas monopoly Gazprom, revealed that Russia is ditching its plans to build a gas pipeline under the Black Sea to supply central and southern Europe.

The abandonment of the €40 billion ($50 billion) South Stream project triggered irritation both in Brussels and among European partners of the consortium building the pipeline, which was already under construction.

BASF subsidiary Wintershall, the largest oil and gas producer in Germany, responded with a terse statement saying it would discuss the announcement “with our European and Russian partners within the partners’ meeting.”

But the companies that Gazprom had brought on board were quietly expressing more direct criticism. Representatives from firms including Italian energy provider ENI and French electric utility EDF, which with Wintershall were Gazprom’s partners for the offshore portion of the pipeline, said that the Russians had not provided any advance notice. Seven companies from the countries through which the pipeline would have passed are also affected.

There is a lot at stake for the parties involved. Wintershall, for example, holds 15 percent of the offshore portion of South Stream and has invested €100 million ($124 million) in the project company. There are also indirect consequences. For instance, pipe manufacturer Salzgitter saw a sharp decline in its share price on Tuesday.

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