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What next after gas pipeline blocked?

Tuesday, December 02, 2014 - 02:14

Russia's $40 billion South Stream gas pipeline project has fallen victim to plunging energy prices, stalling European demand and the political standoff between the EU and Moscow over the crisis in Ukraine. As David Pollard reports, Russia as now named Turkey as its preferred partner.

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The first seam gets welded on Russia's brand new energy lifeline to Europe. This was only two years ago. But in those years, the gap between Russia and Europe has got wider and wider. And the $40 billion dollar South Stream Pipeline project has, seemingly, fallen through it. Stalling European demand and plunging energy prices are seen as two factors in Russia's decision to scrap the pipeline. With Moscow and Brussels at loggerheads over Ukraine, Russia's foreign ministry also points the finger at Europe withholding its approval for the scheme. (SOUNDBITE) (Russian) RUSSIAN FOREIGN MINISTRY SPOKESMAN, ALEXANDER LUKASHEVICH, SAYING: "You can't force people to like you. We will find other forms to achieve our plans in connection to supplying gas to other regions. (PAUSES TO TAKE A DRINK) The consequence should rather be calculated by those, who, in fact, drove the project to the grave." Vladimir Putin announced the decision at a meeting with his Turkish counterpart in Ankara - which will be one of the few to benefit from it. The pipeline was supposed to cross the Black Sea to southern Europe via Bulgaria - and ultimately supply more than 10 percent of Europe's gas demand. Crucially, it would circumnavigate crisis-hit Ukraine - thus eliminating the supply disruptions of the past. And would bring jobs, money and extra fuel security to Bulgaria, Hungary and Serbia. Serbian prime minister Aleksander Vucic. (SOUNDBITE) (Serbian) SERBIAN PRIME MINISTER, ALEKSANDAR VUCIC, SAYING: "We are paying the price of a conflict among big powers ... Whether it would be better to have the South Stream, well clearly it would be, Serbia would be energy-safer country, but we will do our work and the people should not be worried." Turkey is now the preferred pipeline partner for an alternative route - and will get discounted gas as a bonus. It may be a short-term win for Russia too. The new plan could relieve pressure on financing and ease the cash flow for its gas distributor, Gazprom. Richard Hunter is from Hargreaves Landsdown. (SOUNDBITE) (English) RICHARD HUNTER, HEAD OF EQUITIES, HARGREAVES LANSDOWN, SAYING: ''There are bigger fish to fry when it comes to Russia, not least of which is the currency at the moment. There's also the fact that the oil price is continuing to nudge near lows where it could begin to hurt Russia.'' Much of the supply Turkey receives should one day still end up in Europe. But in the meantime, how to fill the supply gap left by South Stream leaves Brussels with a major new headache.

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What next after gas pipeline blocked?

Tuesday, December 02, 2014 - 02:14