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Turkey approves South Stream construction

December 28, 2011
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MOSCOW—Turkey has given Russia the go-ahead for the construction of a gas pipeline under the Black Sea, Russia's energy giant Gazprom said Wednesday.

Prime Minister Vladimir Putin, who received the written permission from visiting Turkish energy minister Taner Yildiz, described the approval in comments carried by Russia's news agencies as "a big event in Europe's energy sphere."

The South Stream project is meant to transport Russian natural gas to Europe. The pipeline, which is expected to start operating in 2015, would ship up to 63 billion cubic meters (2 trillion cubic feet) of gas annually to Bulgaria, Serbia, Hungary, Slovenia, Austria and Italy in one leg and Croatia, Macedonia, Greece and Turkey in a second.

The permission was the final hurdle to the pipeline's construction, and Gazprom's chief executive Alexei Miller described it as "the most serious proof" that the project will be completed by 2015.

South Stream, funded by Gazprom, France's EdF, Italy's Eni and Germany's Wintershall, is rivaling the EU-backed Nabucco pipeline that's slated to ship gas from the Caspian region to Austria. Turkey has said the two projects should complement each other.

Market watchers and economists have claimed that the South Stream project is doomed to be unprofitable. It has also been seen as the final replacement for the Ukrainian route for Russian gas.

Russia has been anxious to get control, or at least a substantial share, in the Ukrainian export pipeline. If it had done so, analysts had feared Russia would abandon the South Stream project altogether.

But Gazprom's Miller indicated on Wednesday that it has no such plans and there will be no cuts in gas shipments even if the company gets a share in the Ukrainian pipeline.

Also on the sidelines of Russian-Turkish talks, Ankara has agreed to boost gas purchases from Russia by 2 billion cubic meters to 27.5 billion next year.

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