UPDATE 3-Bulgaria says has not abandoned South Stream pipeline project

Mon Jun 9, 2014 11:36am EDT

* EU welcomes Sofia's suspension of work on South Stream

* Russian envoy sees EU moves as "economic sanctions by stealth" (Releads, adds Russian EU envoy comment)

By Tsvetelia Tsolova

SOFIA, June 9 (Reuters) - Bulgaria has not given up on plans to build the South Stream pipeline to deliver Russian gas to Europe and believes the Gazprom-led project will be completed once issues over its structure are resolved, Energy Minister Dragomir Stoynev said on Monday.

Designed to bypass Ukraine, the pipeline has raised tensions between the European Union and Russia after Brussels asked Sofia last week to suspend work pending a decision on whether it complies with EU law.

Bulgaria, the EU's poorest member and almost wholly-dependent on Russian gas - said on Sunday it had halted work on the pipeline.

Vladimir Chizhov, Russia's envoy to the European Union, said on Monday EU moves against the Moscow-led South Stream pipeline project could be considered as "economic sanctions by stealth," Itar-Tass news agency quoted him as saying.

State-controlled Gazprom is pushing ahead with the project, expected to be cost around $45 billion, despite Western sanctions against Moscow over the Ukraine crisis.

Stoynev said he was certain South Stream would be built once disputes over how to structure it as a European project were cleared. "If we look at the situation strategically and without emotions, the South Stream project looks irreversible and important for both Europe and Bulgaria," Stoynev, who is on a visit to China, said in a statement.

"I am convinced that all pending issues will find a solution."

South Stream will be able to pipe 63 billion cubic metres of gas per year from Russia via the Black Sea and Bulgaria into central and southern Europe, bypassing Ukraine, as Russia seeks to cement its position as Europe's dominant gas supplier.

European Commission spokeswoman Sabine Berger declined to comment on Stoynev's statement, but welcomed EU member Bulgaria's decision to suspend work on the project.

"This is an important step in response to the concerns raised by the Commission last week," she said. "The European Commission has called for a discussion on South Stream at the upcoming European Council so that a common EU approach can be taken."

Washington has warned Sofia that picking a consortium led by sanctions-hit Stroitansgaz to build the Bulgarian section of the pipeline could result in sanctions on Bulgarian companies involved.

Bulgaria's Stoynev, a staunch supporter of the project, says it will boost the country's energy security and economy. Bulgaria currently gets almost all of its gas from Gazprom via a pipeline through Ukraine.

"We really are actively working to close the open issues with the European Commission, meaning that we have not abandoned the project," Stoynev said.

In neighbouring Serbia, Energy Minister Aleksandar Antic said the government had decided not to halt development of its stretch of South Stream.

"We will continue to monitor the situation and liaise with the government ...honouring obligations we took on our path to European Union membership," Antic told Reuters.

"The South Stream project is of major importance for (Serbia's) energy security and I believe that the talks between EU, Russia and countries that participate in the project will clarify the situation," Antic said. (Reporting by Barbara Lewis in Brussels, Aleksandar Vasovic and Ivana Seklularac in Belgrade, and Katya Golubkova and Vladimir Soldatkin in Moscow; editing by Jason Neely and Jane Merriman)