Russia Says Greece May Borrow Using Its Gas-Transit Guarantee

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Gas Pipeline
Running out of options to keep his country afloat, Greek Prime Minister Alexis Tsipras started talks with Russian President Vladimir Putin on a pipeline from Russia to Europe via Turkey and Greece earlier this month. Photographer: Alexander Zemlianichenko Jr./Bloomberg

Russia’s guarantee to deliver gas for the European market through Greece in five years would help the debt-burdened Greek economy to get new loans, according to Moscow-based OAO Gazprom.

The state-run gas company will guarantee to ship as much as 47 billion cubic meters of fuel per year after Greece joins a proposed gas-pipeline project, Alexey Miller, Gazprom chief executive officer, said Tuesday. That deal may help the country, which is struggling with a debt crisis, in getting “an external funding for other projects,” he said in a statement after meeting Greek Prime Minister Alexis Tsipras in Athens.

Running out of options to keep his country afloat, Tsipras started talks with Russian President Vladimir Putin on a pipeline from Russia to Europe via Turkey and Greece earlier this month. Putin proposed the project after the European Union blocked Russia’s planned $45-billion South Stream link through Bulgaria as relations soured to a Cold-War low over the conflict in Ukraine.

The Greek part of the route may cost an estimated 2 billion euros, Miller said. His spokesman Sergei Kupriyanov declined to comment on a possible lender to Greece, saying that Gazprom is not a bank.

If there’s political will in Russia to help Greece, any state-run bank in Moscow might provide a loan, Egor Fedorov, an analyst at ING Groep NV in Moscow, said.

Putin’s Promise

Putin earlier this month promised Tsipras “hundreds of millions of euros every year” for gas transit to the EU if Greece signed on.

European leaders want Greece to do more to revamp its debt-burdened economy, with progress to be reviewed on Friday in Riga, Latvia, when finance ministers from the euro area meet to assess the country’s progress in making reforms required for a disbursement from its 240 billion-euro ($257.9 billion) bailout fund.

Leaders are pressuring Greece to submit specific reforms as the country runs out of cash and faces debt payments and monthly salary obligations in the coming weeks.

Russia may give Greece as much as 5 billion euros in advance payments for the proposed gas transit under an energy agreement to be signed this week, Spiegel reported on Sunday, citing an unidentified official in Greece. Putin’s spokesman Dmitry Peskov denied that there is such an agreement, according to Interfax.

Gazprom Threat

Gazprom is threatening to shift all gas flows that cross Ukraine to the new route from 2020, after signing a framework accord with Turkey’s Botas AS in December.

An agreement with Greece may be signed soon, Greek Energy Minister Panagiotis Lafazanis said Tuesday in televised comments. The pipeline will conform with EU rules, both Lafazanis and Miller said. The Gazprom CEO added that the Greek link would be built by “a Russia-Europe consortium” without elaborating.

“I believe the European Union will support this project,” Lafazanis said.

For the time being, all preliminary accords with Greece would just be politics. The pipeline won’t get built without the backing of Turkey and the EU, analysts Maxim Moshkov from UBS Group AG and Alexander Kornilov from Alfa-Bank said. The EU’s imminent antitrust complaint against the Russia’s state gas-exporter also makes the project’s future uncertain.

“Gazprom can’t proceed with the project if it ends in Greece and starts in Greece,” Kornilov, a senior oil and gas analyst at Alfa-Bank in Moscow, said.

Supply Security

Gazprom and Turkey are bogged down in price talks related to the proposed pipeline, now known as Turkish Stream, people with knowledge of the matter said last week. The countries aren’t likely to start building the link earlier than next year, said Alfa-Bank’s Kornilov.

While Hungary has indicated it’s willing to participate in the project, no other major gas consuming states in the EU have joined. The pipeline would probably reach Italy and Central Europe, according to Putin.

The EU needs to analyze that plan, its energy chief Maros Sefcovic said in an interview with Kommersant newspaper, published Tuesday.

“How will we approach this project? To some extent, this is the same story as with South Stream,” he said. “The announcement was made -- a very important one in the context of supply security in Southeastern Europe -- which wasn’t discussed with us beforehand.”

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