Serbia's TurkStream branch to impede competition -EU watchdog

SARAJEVO, March 7 (Reuters) - The European Union’s energy watchdog said on Thursday a planned section of Gazprom’s TurkStream pipeline set to carry Russian natural gas across Serbia to Europe will hurt competition in the region.

Serbian energy regulator AERS gave Gastrans the go-ahead this week to proceed with the project, exempting it from the EU’s Third Energy Package, a 2009 reform that sought to integrate the EU’s energy market and boost competition.

Gastrans is owned by Swiss-based South Stream Serbia, in which Russia’s Gazprom holds a 51 percent stake and Serbia’s gas monopoly Srbijagas the remainder.

The Energy Community, a body established by the EU to extend the bloc’s energy policy to would-be members, said by doing so, Serbia had missed a chance “to bring the project of this significance and magnitude in compliance with European rules”.

AERS has rejected or fundamentally changed all conditions set by the Energy Community related to unbundling, third party access and tariff regulation, Energy Community deputy director and legal counsel Dirk Buschle told Reuters.

Gazprom’s TurkStream project plans to deliver gas to Europe via Turkey, Bulgaria, Serbia and Hungary.

“No similar requests (for EU rule exemptions) were filed by the pipeline system operators in Bulgaria and Hungary to their respective regulatory authorities,” said Buschle.

“With this, the pipeline is actually ...not covered by the Third Energy Package and we regret that,” he said.

“This was an important opportunity, maybe the only one, to ensure that a project of such magnitude and impact not only on Serbia but also on neighbouring markets was in line with European rules.”

TurkStream is part of Russian plans to bypass Ukraine, currently a main transit route for its gas deliveries to Europe. Ties between Ukraine and Russia have deteriorated since Moscow’s annexation of Crimea in 2014.

The planned 400-km stretch through Serbia is expected to be completed by Dec. 15 with a capacity of 13.88 billion cubic metres a year. (Reporting by Maja Zuvela; editing by Jason Neely)