Russia's Gazprom Plans Pipeline to Italy

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25 June 2007 -- Russia's state-controlled gas monopoly and the Italian energy company, ENI, recently announced plans for a new pipeline under the Black Sea to Bulgaria and on to Italy. The multi-billion-dollar project will further extend Gazprom's reach into western European markets.

Italian news reports says the huge South Stream project will cost as much as $15 billion. The two companies will share the cost of building a 900-kilometer underwater pipeline across the Black Sea to Bulgaria. From there the line would proceed to Italy either west through Greece or northwest through Serbia and Croatia. Vladimir Socor, an energy analyst in Munich, says Gazprom is solidifying its position as the dominant supplier to the West European market.

"This deal is a continuation of Gazprom's policy of capturing markets and infrastructure in Europe," he said. "Gazprom is winning this contest, this competition, against western interests."

Italy is Gazprom's second biggest customer in Western Europe after Germany. Socor says South Stream, if it goes ahead, is a severe setback for Nabucco, a western-backed alternative that would by pass Russia and bring Central Asia gas to Western Europe through Turkey. On the drawing board for several years, Nabucco has not yet obtained financing. Last month Nabucco was dealt a significant blow when Kazahkstan and Turkmenistan signed a deal with Russia for a new pipeline to carry Turkmen and Kazahk gas west via Russia. Socor says Gazprom is similarly extending its control over gas exports from Central Asia.

"That means that Gazprom will be able to supply this [South Stream] and other pipelines in Europe by delivering Central Asian gas from Turkmenistan and Kazakhstan in the guise of [it being] Russian gas," he said.

There are concerns that with a 40 percent import share, Western Europe is excessively dependent on Russian gas. Despite that, several countries including Germany, Italy, Greece, Bulgaria and Hungary have been eager to expand their links to Gazprom, a Kremlin controlled firm that is the world's biggest gas producer. Vitaly Mekushev, director of the Eurasian Political Studies Network in Moscow, says Gazprom does not yet operate in the transparent manner of western corporations.

"I agree that Russian companies should be more transparent, especially Gazprom," he said. "It should be improved, I agree."

In terms of market capitalization (the aggregate value of its shares) Gazprom is the world's third biggest company. Gazprom chairman Alexander Medvedev says the company's market capitalization should quadruple to reach one trillion dollars by 2017, making it the world's biggest corporation.

Source: VOA News