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Gas supplies

April 25, 2010

Austria has signed up to build part of Russia's South Stream gas pipeline, while keeping a hand in the competing European pipeline Nabucco.

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gas pipelines with Gazprom logos
Russia's Gazprom is South Stream's main backerImage: RIA Novosti

Austria on Saturday signed an agreement with Russia that will see the alpine state build part of Russia's South Stream gas pipeline.

The 20 billion euro ($26.7 billion dollar) pipeline, which is backed by Russia's Gazprom and Italian utility ENI, is expected to pump Russian gas under the Black Sea through Bulgaria, before branching off into Austria and Greece.

South Sea will allow Russia to strengthen its market share in Europe, while a competing project, the European-led Nabucco pipeline, will bypass Russia in an effort to reduce Europe's dependence on Russian gas.

Although Austria is also involved in the Nabucco project, its Chancellor Werner Faymann believes Austria can play a role in both pipelines.

"We don't see any conflict of interest... on the contrary, it means a diversification, it means that we have more options," Faymann said in a news conference on Saturday.

Putin scorns Nabucco

The 7.9 billion euro Nabucco project, which will also end in Austria, but bypass Russia by pumping gas from the Caspian Sea, is part of the EU's efforts to wean itself off Russian gas. However, so far, it has no confirmed suppliers and it has been hit by several delays.

European Commission President Jose Manuel Barroso, prime ministers Gordon Bajnai of Hungary, Werner Faymann of Austria, Recep Tayyip Erdogan of Turkey, Sergei Stanishev of Bulgaria and Emil Boc of Romania, from left, are seen during the Nabucco Gas Pipeline signing ceremony in Ankara, Turkey, Monday, July 13, 2009.
The Nabucco pipeline is part of the EU's efforts to rely less on Russia for energyImage: AP

"Building a pipeline without supply contracts is pointless and extremely dangerous," Putin said in Vienna, the Austrian capital. "Name me one contract that has been signed for Nabucco," he added.

Faymann was keen to downplay the conflict between Russia and Europe by stressing that Austria could benefit from both systems. He also pointed out that it was by no means clear where exactly the gas supplies for Nabucco would come from.

Putin, meanwhile, further flexed his muscles by insisting that Russia has enough resources to supply gas to Europe "for the next 100 years."

South Stream is expected to go online in 2015, one year after Nabucco is currently scheduled to start operating.

Russia has already secured bilateral contracts with Bulgaria, Greece, Hungary and Slovenia on South Stream.

ng/Reuters/AFP
Editor: Nigel Tandy