Russia clinches Greece accord to build gas pipeline to Europe

6/19/2015

ELENA MAZNEVA and ELENI CHREPA

ST. PETERSBURG, Russia (Bloomberg) -- Russia signed a preliminary agreement on building a natural-gas pipeline through Greece, a deal that signals strengthening ties between the countries as the crisis-stricken government in Athens is increasingly isolated from the rest of Europe.

Russia’s development bank, known as VEB, will own 50% of the 2 billion-euro link and provide all financing, Greek Energy Minister Panagiotis Lafazanis told reporters after the signing in St. Petersburg, Russia, on Friday. Greece will own the rest, Russian Energy Minister Alexander Novak said.

Russian President Vladimir Putin is luring Turkey and debt-burdened Greece with promises they’ll become new energy centers for southern Europe if the Black Sea pipeline is built. He’s seeking a new route after the EU blocked OAO Gazprom’s South Stream pipeline. Russia dropped the $45-billion project in December as relations with the 28-nation bloc soured over the conflict in Ukraine.

“The pipeline is not against anyone in Europe or the world,” Lafazanis said. “It is here to serve people, peace and stability.”

Gazprom, which is the world’s biggest natural-gas producer, won’t hold a stake in the section crossing Greece, Novak said. That section will have annual capacity of 47 Bcm, with construction starting in 2016 and completion set for 2019, he said.

Gazprom, which plans to start laying the subsea link known as Turkish Stream this month, said in April its guarantee to deliver gas for the European market through Greece would help the country to get new loans. Putin promised Greece that owning the new link, in partnership with Russia, would bring the debt-burdened economy “hundreds of millions of euros every year” for gas transit.

Gazprom plans for the network to have capacity of as many as 63 Bcm of gas a year with 75% going from Greece to the EU.

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