Austria Hopes EU Objections to South Stream Resolved in Next Month

Austria is hoping differences with the European Commission over the South Stream pipeline project can be resolved in the next month or so, allowing the plan to move ahead, Austrian Foreign Minister Sebastian Kurz said on Friday.

Plans to build the $40 billion pipeline carrying enough Russian gas to meet almost 15 pecent of European demand while bypassing Ukraine have divided EU member states and run into opposition from the Commission.

The European Union had effectively put the pipeline project on ice after Moscow's annexation of Ukraine's Crimean peninsular, and was already in dispute with Gazprom over its refusal to allow other producers to use the pipeline, which would breach the EU's energy market competition laws.

Asked about the EU's concerns Kurz said: "There are some open questions with the Commission... We are hoping we will have the opportunity to clarify them over the next month and then no obstacles will stand in the way. I think this is possible."

Kurz was speaking after a meeting of central European and west Balkans foreign ministers in Bratislava.

Gazprom and Austria's OMV sealed a deal in June to build a branch of the South Stream pipeline to Austria, and Austrian speciality steel group Voestalpine said last month it would deliver 120,000 of plates for the project.

The Commission has said South Stream, as it stands, does not comply with EU competition law because it offers no access to third parties. South Stream also counters the EU's policy of diversifying supply sources to reduce dependence on Russia.

Hungarian Foreign Minister Peter Szijjarto said Hungary backed the project because it would diversify gas routes, although it did not diversify sources.

He said the option was on the table after the failure of the Nabucco pipeline project that was due to bring gas from Azerbaijan and potentially other countries outside Russia.

The chief executive of MVM, the main Hungarian participant in the project, was quoted as saying this week that Hungary could start construction on its stretch of the pipeline within six months and complete it by 2017.

Russia has markedly reduced the amounts of gas shipped via Ukraine in the past months, according to data available from the Ukraine/Slovakia border pumping station, but without South Stream it lacks pipeline capacity to circumvent Ukraine altogether.

Ukrainian Prime Minister Arseny Yatseniuk, speaking on Friday after a new gas agreement with Russia was nailed down, said Ukraine would guarantee deliveries of gas through its territory to Europe to make sure Moscow had no room for "blackmailing" and criticised the South Stream project.

(By Jan Lopatka, Editing by Susan Thomas)