By Apostolis Fotiadis
ATHENS, Jun 13 2008 (IPS)

An agreement between Russia and Greece to cooperate in the construction of a part of the South Stream gas pipeline has been received with mixed feelings.

The announcement Apr. 29 was welcomed in Greece as a major success of the ‘energy diplomacy’ pursued by the government, which aims to make the country a major transit centre for energy routes crossing from the east towards the rest of Europe.

Greek minister for development Christos Folias said the project aims are “improving and securing the energy infrastructure in Greece, diversifying sources and reducing dependency on petroleum products, and replacing them in the long term with natural gas.”

According to the current plan, South Stream will reach Bulgaria from the Black Sea and then follow two routes, going northwards through Serbia and Hungary to Austria, and southwards crossing Greece and Albania, ending up in Italy. It will carry 31 billion cubic metres (bcm) of gas annually. The rights, in proportion to the part of the pipeline built inside Greek territory, will be split equally between Russian Gazprom and Greek Desfa.

On top of this deal Greece has proposed reconsideration of the agreement for the supply of Russian natural gas signed in 1987 and lasting up to 2016. Greece is looking for a deal up to 2040.

The South Stream project is the second major energy agreement between Russia and Greece signed in the last two years. It was preceded by a trilateral agreement last year among Greece, Russia and Bulgaria for creation of the Burgas-Alexandroupolis oil pipeline. When Burgas-Alexandroupolis is completed, it will carry between 35 million and 50 million tonnes of oil a year from the Caspian Sea and Russia to be sold in Europe, the United States and Asia.

Improvement in relations is reflected also in recent plans for introducing Russian language classes in some secondary schools, something requested personally by former president Vladimir Putin, and a Greek decision to buy 420 armoured vehicles from Russia instead of Italian and German alternatives.

The success of the ‘energy diplomacy’ has been received less enthusiastically elsewhere. U.S. State Department deputy under-secretary Tim Braiza expressed his concern over the growing dependency of Greece on Russian energy resources, and warned that the deal puts the creation of ‘TGI’ in danger. TGI (from the initials of Turkey, Greece and Italy) is a pipeline project promoted by the U.S. to transport Azeri gas to Europe. The U.S. has been looking for priority for this over other projects.

“You can have both, TGI and South Stream, if you create TGI first,” Braiza said. “But if you make South Stream first, then I am afraid you will stay only with this.”

Ioannis Grigoriadis, lecturer at the University of Athens and research fellow at the Hellenic Foundation for European and Foreign Policy, says this response has been too nervous. “Greece is a newborn gas market, meaning consumption is going to grow together with demand for resources, which now are available in Russia,” he told IPS.

Greece imports 78 percent of its gas from Russia. It also imports liquidised gas from Algeria.

“Of course there is an issue of dependency, but this should be regarded as a general European issue,” Grigoriadis said. “The small size of the Greek market makes probable that while imports from Russia might keep growing, diversification of resources could reduce the percentage coming from this supplier.

“The government should take care to emphasise that Greece cooperates creatively with every partner. It’s been a decision to promote TGI and South Stream, thus securing diversification of energy sources. This means Greece is practising energy politics in an open-minded way, exploiting all opportunities presented by good partners.”

Excerpt: