The Western media have called Russia's refusal to build the South Stream a diplomatic defeat for President Vladimir Putin, and named economic inefficiency of the project as one of the reasons for its halt.
RBC notes that business analysts have explained Russia's refusal to continue the South Stream project by a number of political and economic circumstances relevant to the complicated relations between Moscow and Brussels. Also, none of the experts referred to the rules of the "Third Energy Package", which was considered the main stumbling block between Russia and Europe
Reuters believes that Russia's $40 billion gas pipeline project has fallen victim to plunging energy prices, stalling European demand and the political standoff between the European Union and Moscow over the crisis in Ukraine.
Chris Weafer, a partner in the Moscow office of the Macro Advisory consulting firm, told Bloomberg, that Moscow's decision is "a classic example where access to energy is being made into the subject of trade talks on political and economic cooperation." "Putin apparently expects that expansion of cooperation with Turkey will be able to some extent compensate for the deterioration of trade relations with the EU," the expert added.
Reuters notes that South Stream would need to be marketed at an equivalent of $9.50-$11.50 per million British thermal unit (mmBtu), including a 30 percent export duty, estimates have shown. The average European spot gas prices have ranged between $6-$9 per mmBtu this year.
"I don't think Putin is bluffing. I think he's really adapting to a fundamentally new geopolitical situation in Europe," the IISS' Noel told Reuters. He expressed confidence that South Stream will be scrapped for good.
Former "South Stream" project.
"It (scrapping South Stream) reflects internal Russian pressure on where it is going to invest limited resources at a point in time when sanctions are hitting," said Carlos Pascual, a fellow at Columbia University's Center on Global Energy Policy, referring to Western sanctions over Ukraine.
"It's harder, more expensive to access capital and the fastest growing gas markets in the world are in Asia, and Russia has virtually no export capacity to the Asian market," he added.
"The alternative to Turkey is even more doubtful than the direct option to Europe," one financial adviser who has dealt with the matter said on condition of anonymity.
The gas discount offered to Turkey casts further doubt over a project that was already economically doubtful, and would be far too big for Turkey alone to receive all the gas, supplying four times its annual demand.
"Even if it went to Turkey, most of its gas would end up in Europe, so it begs the question why introduce a transit risk instead of attempting to solve Russia-EU differences and run it directly to Europe as initially planned," the adviser added, according to Reuters.
Ending the project may save Gazprom from unnecessary spending in the future because there's already sufficient delivery capacity to Europe, said Mikhail Korchemkin, a former analyst for theSoviet Union's Gas Ministry, founder of Malvern, Pennsylvania-based East European Gas Analysis told Bloomberg.
"There won't be any new pipeline to Europe," said Korchemkin. "That may be not the worst news for the company at the end of the day."
The New York Times called it "a rare diplomatic defeat for Mr. Putin, who said Russia would redirect the pipeline to Turkey. He painted the failure to build the pipeline as a loss for Europe and blamed Brussels for its intransigence.
"The decision also seemed to be a rare victory for the European Union and the Obama administration, which have appeared largely impotent this year as Mr. Putin annexed Crimea and stirred rebellion in eastern Ukraine," the newspaper noted.
The Wall Street Journal described the rejection of the pipeline in its original form as "yet the most obvious proof that Russia gives in to pressure from the EU." The authors also drew attention to the Russian-Turkish relations, particularly evident in the economic sphere.
The latter is noted by the German Die Welt. IT points out that Russia has not abandon its plans to supply gas to the south-west direction but, in fact, only changed the transit country from Bulgaria to Turkey: "Both sides are determined to deepen trade cooperation, in spite of the different positions on many issues. In particular, to the civil war in Syria." The publication believes that stopping the project has more to do with internal factors, rather than opposition from Brussels. "The energy state is currently weakening due to oil prices drop and deterioration of the situation in light of sanctions and the Ukrainian crisis. It is possible that it has made a significant contribution to the Kremlin's decision," Die Welt reports citing Russian experts.
The German Frankfurter Allgemeine Zeitung calls the scrapping a personal defeat of Vladimir Putin as he "supported and defended the project over the years." According to columnist Michael Martens, the decision of the Russian authorities shows that "the Kremlin is now taking the strong position of the European Commission in relation to the project seriously" and that "pro-Western policy of the new government of Bulgaria to ourselves should be taken seriously by us as well." The poorest country in the EU could financially benefit from the implementation of the South Stream, but decided to take the side of Brussels. But there is an element of force in such decision: "a small country with seven million people would be unable to win in the confrontation with the European Commission."
The South Stream was to pass through Bulgaria, Serbia, Slovenia, with stops in Italy, Austria and Croatia. The project was to start in 2015. Its capacity was planned at 63 billion cubic meters.
Read also: Putin Announces Scrapping of South Stream Pipeline: "Russia Cannot Continue in These Conditions"
Read also: Russia Understands that South Stream Has no Future: 'Bulgaria Acts the Same Way as Ukraine'
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