* OMV and Gazprom aim to get permits by end-2015
* Full commissioning expected January 2018
* Parties relying on 2010 intergovernmental agreement
(Adds OMV comment on sanctions, details of route, background)
By Georgina Prodhan
VIENNA, April 29 Russia's Gazprom and
Austria's OMV said on Tuesday that they had signed a
memorandum of understanding to build a spur of the South Stream
gas pipeline to Austria, despite Western sanctions against
Moscow over Ukraine.
The pipeline is designed to carry Russian gas to Europe,
bypassing Ukraine - through which existing pipelines carry
nearly half the gas that Europe buys from Russia. The project
faces stiff resistance from some EU and U.S. officials, who want
Europe to reduce its reliance on Russian energy.
U.S. and EU sanctions imposed on Russia over its annexation
of Ukraine and subsequent actions have so far been limited to
asset freezes and travel bans on individuals and companies
closely linked to Russian President Vladimir Putin or to
Russia's annexation of Crimea, and on pro-Russian separatist
rebels in eastern Ukraine.
Neither Gazprom nor its managers have been targeted. Gazprom
Chief Executive Alexei Miller is a longstanding ally of Putin's.
OMV said the two companies aimed to get the necessary
permits by the end of 2015, make the first gas deliveries in
2017 and fully commission the spur, with half the capacity of
the main pipeline, by January 2018.
Both Gazprom and OMV have warned against broadening Western
sanctions, saying they could disrupt gas exports to Europe.
Asked about the potential effect of sanctions, an OMV
spokesman said: "We cannot foresee what will happen in the short
term but, in the long term, we are convinced of South Stream's
contribution to European security of supply."
Italy's Saipem, already contracted to work on one
of four parallel South Stream pipelines due to cross the Black
Sea, said on Tuesday it had won a 400 million euro ($554
million) order to work on another of the pipelines.
The European Union, concerned about Russia's dominant role
in supplying a third of the bloc's gas, says South Stream does
not comply with EU regulations on ownership and third-party
access, regardless of bilateral agreements between Russia and
some EU countries.
But some EU leaders see South Stream as a solution to the
potential for more problems following disruptions to the gas
flow through Ukraine in 2006 and 2009.
South Stream's path from the Bulgarian Black Sea coast
through Serbia and Hungary to the Baumgarten gas hub in Austria
is close to the route that the now-abandoned OMV-led Nabucco
West gas pipeline would have taken, transiting some of the
countries most dependent on Russian gas.
The main branch of the 2,400-km (1,500-mile) pipeline is
planned to continue from Hungary through Slovenia to Italy.
The European Union has placed the approval process for the
project on hold following Russia's annexation of Crimea and said
it might take years to give the necessary permissions.
Gazprom and OMV said they had already established a legal
basis for the Austrian section of South Stream in an
intergovernmental agreement between Russia and Austria signed in
(Reporting by Georgina Prodhan; editing by William Hardy and