Wednesday, July 24, 2024
 
 

Timchenko – South Stream’s Achilles’ Heel

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A consortium led by Russia’s Stroitransgaz is reportedly a shoo-in to win a €3.5 billion deal to build a section of the South Stream natural gas pipeline across Bulgaria. Stroitransgaz is owned by Russian oil billionaire Gennady Timchenko, a long-time acquaintance of Russian President Vladimir Putin. Timchenko’s energy-trading Gunvor Group is now the fourth-largest oil-trading firm in the world.

But the US Treasury Department imposed sanctions on Timchenko on 20 March as part of broader sanctions marked an escalation of efforts to punish Putin and his associates for Russian intervention in Ukraine’s Crimean region. Timchenko was one of 20 people added to a list of individuals banned from entering the US, with any assets in the country frozen and a bar on doing business with US companies.

However, the US sanctions would not affect Timchenko business in Europe and Stroitransgaz possible involvement in constructing the Gazprom-led South Stream unless his name is later added on the EU sanctions list, which includes assets and travel bans. Timchenko owns 63% in Stroitransgaz Group via his Volga Group.

“He is barred from entering the US. But he is a citizen of the EU – he’s a citizen of Finland. So it’s a bit harder to sanction an EU citizen without proper legal procedures,” Alexei Kokin, a senior oil and gas analyst at UralSib Financial Corp, told New Europe on 28 March. “The EU might actually oppose the whole project rather than some of the contractors or sub-contractors,” he said.

Kokin reminded that the European Commission has said that some clauses and bilateral agreements between Gazprom and individual countries are against the Third Energy Package and some other EU regulations. “Gazprom probably will have to change that. Last year the EU was okay with helping Gazprom renegotiate those agreements and I’m not sure it will be ready to help,” he said. Russia’s annexation of Crimea has heightened tension between Moscow and the West, prompting the EU recently to say it planned to delay talks over the project.

The 63-billion-cubic-metre South Stream project is seen as crucial for Russia’s ambitions to strengthen its position as Europe’s dominant gas supplier. Expected to start deliveries in late 2015, South Stream will carry Russian gas across the Black Sea, bypassing Ukraine.

Meanwhile, Bulgarian media has suggested that after Timchenko’s name appeared on the US sanctions list, the Bulgarian government would feel uncomfortable – given that Bulgaria is an EU and NATO member – to authorise Timchenko to operate on Bulgarian soil.

A source close to the Bulgarian government in Sofia told New Europe on 26 March that “all references to the signed or still unsigned contract have stopped”. The source said that the actual construction might be given to another company, which is also indirectly owned by Timchenko but is legally headed by another businessman who is not on any list.

However, sources close to Gazprom in Moscow told New Europe on 25 March that the US sanctions will not affect the construction of South Stream in any way. “His assets and bank accounts (if he has any) are frozen (in US), his visa canceled. How can it ever affect the construction of South Stream in Bulgaria?” one source quipped.

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Co-founder / Director of Energy & Climate Policy and Security at NE Global Media

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