Russia's Putin wins approval for gas pipeline to EU

NOVO-OGARYOVO, Russia (Reuters) - Russian Prime Minister Vladimir Putin won Slovenia’s approval on Saturday for the South Stream pipeline, undermining European Union efforts to reduce dependency on Russian gas supplies.

The seal of approval is the latest victory for the Kremlin as it seeks to counter the long delayed Nabucco pipeline which is backed by the European Union as a way to curb dependency on Russia by pumping gas from the Caspian and the Middle East.

Slovenia's approval brings the South Stream pipeline a step closer to being built, though its backers -- Russian gas behemoth Gazprom GAZP.MM and Italy's Eni SpA ENI.MI -- still have to raise billions of dollars to finance the project.

“We have now signed deals with all the European partners needed for this project to be completed,” Putin told reporters at his Novo-Ogaryovo residency outside Moscow after signing the cooperation deal with Slovenian counterpart Borut Pahor.

Slovenia is the fifth country to sign such an agreement with Russia on the South Sea pipeline, which will skirt Ukraine and cross Bulgaria, Serbia, Hungary, Greece, Slovenia to Italy.

With a capacity of 63 billion cubic metres a year, the pipeline is expected to cost between 19 billion and 24 billion euros ($28 billion to $36 billion). It is due to become operational in 2015.

“Thanks to Slovenia’s participation, Russian natural gas will reach the Italian border, the main target market for the (South Stream) project,” a Russian government source, who requested anonymity, told reporters.


Leaders in the European Union, which imports more than a quarter of its gas from Russia, were dismayed in January when a row between Ukraine and Moscow left European Union customers without gas in the dead of winter.

That dispute provoked calls for the European Union to diversify away from Russian gas supplies, though officials at Gazprom forecast EU dependency on Russian supplies will increase over the next decade.

Russia has been trying to persuade major European powers that support for alternative supply routes -- such as South Stream and another project known as Nord Stream -- will ensure smooth supplies. Both projects bypass Ukraine.

Putin, who said Russia will cut gas deliveries to Europe again this year if Ukraine siphons off transit supplies crossing its territory, will travel to Ukraine next week to discuss energy with his Ukrainian counterpart Yulia Tymoshenko.

Nord Stream, which will pipe gas under the Baltic Sea to Germany, recently received approvals from Denmark, Sweden and Finland, a sign that construction work may start next year.

Approval for the pipelines is a coup for Putin, Russia’s powerful prime minister who takes a keen interest in energy politics, and a blow for Nabucco, which has been plagued by a lack of supply agreements.

But Gazprom is facing an unprecedented fall in demand as some of its European customers switch to cheaper, liquefied natural gas and has yet to secure billions of dollars in financing for South Stream.

Slovenia had said in the past it also supports Nabucco, which if built would transport 31 billion cubic metres of gas a year from the Caspian region to an Austrian gas hub via Bulgaria, Romania, Turkey and Hungary.

Writing by Guy Faulconbridge, Dmitry Sergeyev and Gleb Bryanski; editing by Michael Roddy