Kremlin launched the South Stream project

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MOSCOW. (RIA Novosti economic commentator Oleg Mityayev)

On November 22, representatives of the Russian gas monopoly Gazprom and Italian oil and gas corporate group Eni signed an agreement to set up a joint venture for the ambitious South Stream project, in the presence of Russian President Vladimir Putin and Italian Prime Minister Romano Prodi in Moscow.

The project, with a price tag of more than $10 billion, provides for the construction of a gas pipeline with a capacity of 30 billion cubic meters a year between Russia's Black Sea coast and Italy.

Last June, representatives of both companies announced in Rome the start of the project's feasibility studies. The Russian-Italian joint venture, set up on November 22, will develop the project and may become its operator. Eni and Gazprom have split the shares fifty-fifty but companies from transit countries may join the project during the preparatory stage.

The South Stream gas pipeline will travel along the sea floor from Russia's Black Sea coast to the Bulgarian coast. There are two options for laying it further on land. The first one goes through Greece, Albania, the Adriatic seabed to southern Italy. The second one passes through the Balkans to northern Italy and southern Germany. Moreover, both routes may supplement each other.

This project is largely similar to Nord Stream, the building of a gas pipeline on the Baltic seabed between Russia and Germany. Both pipelines are primarily built in the interests of European consumers. These projects will diversify the routes of Russian gas supplies to Europe, thereby enhancing their safety. Alexander Medvedev, Gazprom's Deputy Board Chairman, said that both projects will follow similar patterns and will encircle Europe with gas pipelines from the north and south. This will make gas supplies more reliable to different parts of Europe.

There are no obvious material benefits for Gazprom in these projects. It could increase gas supplies to the Balkans, Italy and other West European countries at a much cheaper price by extending and expanding the existing routes, such as Soyuz, the biggest gas pipeline connecting Russia with Western Europe. But periodic conflicts over gas transit via Ukraine and Belarus have compelled Gazprom to look for other routes together with its West European partners.

Unlike Gazprom, Eni will directly benefit from the South Stream, since the Italians are bound to receive a great deal of lucrative construction contracts. Moreover, it has increased Eni's chances of taking part in another joint project with Gazprom, the construction of an LNG (liquefied natural gas) plant on the Baltic Coast.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

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