EU law "breached" by S. Stream agreements

The bilateral agreements to build South Stream "are all in breach of EU law and need to be renegotiated from scratch," the European Commission said.

Source: B92, EurActive

This was reported on Thursday by the EurActive website, which noted that the bilateral agreements to build "the Gazprom-favored" gas pipeline were reached between Russia, Bulgaria, Serbia, Hungary, Greece, Slovenia, Croatia and Austria.

Speaking during a gathering the European Parliament Director for Energy markets at the European Commission Klaus-Dieter Borchardt said the deals were "in breach of EU law and will have to be changed."

“The Commission has looked into these intergovernmental agreements and came to the conclusion that none of the agreements is in compliance with EU law," Borchardt said.

"That is the reason why we have told these states that they are under the obligation, either coming from the EU treaties, or from the Energy Community treaty, that they have to ask for re-negotiation with Russia, to bring the intergovernmental agreements in line with EU law,” he added, warning that, unless the contracts are revised, the countries he mentioned "would have to denounce their agreements with Russia."

He explained that the EU's Energy Commissioner Gunther Oettinger "had just sent a letter to Russian energy minister Alexander Novak explaining the situation and asking him 'to look positively' into the possibility of re-negotiating the deals with the countries concerned."

These include EU members Bulgaria, Hungary, Greece, Slovenia, Croatia and Austria, as well as Serbia, which is a member of the Energy Community, an EU-backed international agreement covering former communist countries of Eastern Europe.

“What I can say is the intergovernmental agreements will not be the basis for the construction or the operation of South Stream. Because if the member states or states concerned are not renegotiating, then the Commission has the ways and means to oblige them to do so. And South Stream cannot operate under these agreements,” Borchardt insisted, EurActiv reported.

He then "highlighted at least three major issues about the deals": first, the EU's so-called network ownership unbundling rules "need to be observed". This means that Gazprom, which is both a producer and a supplier of gas, "cannot simultaneously own production capacity and its transmission network."

"Secondly, non-discriminatory access of third parties to the pipeline needs to be ensured. There cannot be an exclusive right for Gazprom to be the only shipper; and thirdly, the tariff structure needed to be addressed," the article quoted the EC official as saying.

“Is it possible to bring in line the construct of South Stream and the operational part of South Stream with these rules? I don’t know. I don’t know yet. But even if negotiations are successful, work to accommodate South Stream with EU concerns would take time. Not months, maybe two years before we get there," Borchardt said.

Asked by EurActiv to reveal when the Commission had made the announcement to the EU countries concerned, Borchardt said this took place in several steps.

"First, the EU executive had asked them to send to Brussels their intergovernmental agreements which were subsequently analyzed by Oettinger's services. He said he had personally chaired a meeting on 18 October, at which he also invited a Gazprom representative, and that the countries were well aware of the situation since," the report said.

“They are fully informed of what I said today,” Borchardt assured.

The parliament event where Borchardt spoke was attended by high-level representatives, including Russian deputy minister for energy Anatoly Yankovski, Gazprom’s Director-General for Export Alexander Medvedev, and Serbian Energy Minister Zorana Mihajlović.

But Russia has apparently no intention of re-opening those deals, EurActive reported, and quoted Gazprom’s Medvedev as stressing that “nothing could prevent the construction of South Stream”.

Borchardt replied by saying, “What the Commission would hardly accept is that you put to us a pipeline that is built, that’s in the landscape, and then handing over the baby to us and say – now it’s up to you, Commission, to find a solution how can we operate it."

Russian Deputy Minister for Energy Anatoly Yankovski, who delivered a prepared speech shortly afterwards, said that Russia does not accept that EU rules should apply to trans-boundary projects such as pipelines, which are not stationed solely on EU territory.

He added that EU law could not prevail in EU-Russia relations, which are governed only by international law. "In other words, the intergovernmental agreements concluded by Russia over South Stream were prevailing over other legal norms," Yankovski said.

Asked to comment on Borchardt's statements, Zorana Mihajlović said this was an issue that "Russia and the EU should discuss amongst themselves."

"The energy agreement which (Serbia) signed with Russia in 2008 is different than those signed by EU member states, because it includes NIS and gas storage facilities," the Serbian minister said, and added that the dispute was "between the Russian Energy Ministry and the EC directorate in charge."

"A small country like Serbia cannot be expected to revise its contracts (with Gazprom) while no other state, even an EU member like Bulgaria, has done the same," Mihajlović said, and stressed that a revision of the energy agreement with Russia would bring down the Serbian government.

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