Putin to Push Pipeline Plan in Sofia

ReutersPeople walking near posters reading "Putin Go Home" in central Sofia on Wednesday. Putin is to arrive Thursday.
SOFIA, Bulgaria -- President Vladimir Putin heads to Bulgaria this week to push a Kremlin plan to build a web of pipelines that would cement Europe's dependence on Russia's energy supplies.

The former Soviet satellite would serve as a gateway for a major new natural gas pipeline, called South Stream, which could branch off in several directions across the continent, dashing the European Union's hopes of reducing its growing reliance on Russia.

The ambitious and costly project, part of Moscow's efforts to expand its political and economic clout inside the EU, will likely top the discussions during Putin's two-day visit, which begins Thursday, although there are no specific deals to be signed.

As part of the Kremlin's energy blitz, Russia promised to extend South Stream into Serbia and build a huge gas storage facility there -- moves that would turn the Balkan nation into a major hub for Russian energy supplies to Europe.

The proposal came as Belgrade has turned increasingly away from the West and toward Moscow, which has staunchly backed it in the international debate over independence for Serbia's breakaway Kosovo region.

The Russian offer, however, comes at a price: Russia wants to take a controlling stake in Serbia's state oil company, Naftna Industrija Srbije, or NIS, at a fraction of its market value. Pro-Western factions in the Serbian government have balked at what they called a "humiliating offer," and it remains unclear whether the agreement can be reached in time for Putin's visit to Sofia.

Russia last year used a veto threat in the UN Security Council to block a Western-backed plan for internationally supervised statehood for Kosovo, and negotiations ended last month without agreement. The Kosovo dispute has badly strained Belgrade's relations with the West, and Russia has used the rift to strengthen business and diplomatic ties with Serbia.

"Kosovo would have been independent for at least a half year already if not for Russia's stance," said Fyodor Lukyanov, the editor of Russia in Global Affairs magazine. "Russia expects some kind of gratitude from the Serbs."

Serbian Prime Minister Vojislav Kostunica, leader of the nationalist faction, has said the country must sign this "strategic" deal with Russia because the gas pipeline would give Serbia a reliable supply of energy. He said the agreement had nothing to do with Kosovo.

Media reports said Kostunica could meet with Putin in Bulgaria on Friday to finalize the gas deal, but officials have not confirmed it. Russia apparently wants to secure the deal before Serbia's presidential election this weekend.

The South Stream project was announced last year by Gazprom and Italy's Eni, which set up a parity joint venture to develop a marketing and feasibility study for the 900-kilometer, $10 billion pipeline.

South Stream would be run under the Black Sea from Russia to Bulgaria, and from there could split off in several directions: north through Hungary to reach Austria, south through Greece and on to Otranto, a port near the southeastern tip of Italy, or west to Serbia.

Using the pipeline offer as an inducement, Gazprom has pushed for a majority stake in NIS.

Over the past several months, Gazprom and Serbian officials have bargained over the terms of the deal, triggering infighting in the Serbian Cabinet. Some Serbian officials say Russia's initial offer of 400 million euros ($600 million) for a 51 percent stake in NIS represents just one-fifth of its market value.