How Greece missed the opportunity to become a partner in transporting Russian gas

Greece could receive natural gas is five to seven times cheaper compared to the prices at which Russia sells it on the international market. However, this did not happen…

Rising energy prices have become inevitable following the cessation of Russian gas supplies through Ukraine since the beginning of the year. This could have been avoided if Greece had not missed the last major opportunity to become a transportation partner “blue gold” by implementing an agreement to build a gas pipeline that would connect Greece directly with Russia.

It's about significant historical agreement between Panagiotis Lafazanis, Minister of Industrial Reconstruction, Energy, Environment and Rural Development in the first Syriza government, and the then Minister of Energy of the Russian Federation Alexander Novak about construction “Southern European Gas Pipeline”. The construction of the gas pipeline would be financed by the Russian Vnesheconombank.

This one is huge “Southern European Gas Pipeline” with an annual capacity of 47 billion cubic meters of gas, the construction of which was supposed to be completed at the end of 2019 (now it would be fully operational), would be jointly owned by Greece and Russia in a ratio of 50 to 50. It was supposed to transport gas through the Black Sea, the European territory of Turkey, to our country, to Italy, the Balkans and Central Europe, bypassing Ukraine.

Greece, based on this gas pipeline, could, like Germany with Nord Streamensure long-term contracts with Russia even in the current crisis getting gas is five to seven times cheaperthan at the prices at which Russia sells it on the European and international markets. At the same time, the Greek budget could receive hundreds of millions of euros annually from gas transit fees!

It is worth noting that when it functioned Nord StreamGermany, thanks to the gas pipeline and long-term preferential contracts, received Russian gas 5-7 times cheaper than other European countries. This was precisely the reason German economic “miracle”.

Greece could have had the same advantages, but missed its opportunity twice: once with South Streamwhich was initiated by the government of Kostas Karamanlis in 2009 and which was “buried” by Georgios Papandreou, and a second time with an unrealized agreement Lafazanis-Novak.

Below is the complete memorandum of cooperation on the gas pipeline, signed by Lafazanis and Novak, so that everyone knows how the country ended up in this difficult situation, because the dominant Greek political system does not think in terms of national interests:

“Today, the Minister of Industrial Reconstruction, Environment and Energy Panagiotis Lafazanis and the Minister of Energy of the Russian Federation Alexander Novak signed a memorandum of cooperation on the construction and operation of a gas pipeline with Russian natural gas, which will pass through Greek territory and is called the Southern European Gas Pipeline.

A joint statement was also signed between the Minister of Industrial Reconstruction, Environment and Energy Panagiotis Lafazanis and the Chairman of the Russian state Bank for Development and International Economic Affairs (Vnesheconombank) Vladimir Dmitriev on support for the project.

Agreement between Russia and Greece on a gas pipeline

The Ministry of Industrial Reconstruction, Environment and Energy of the Hellenic Republic and the Ministry of Energy of the Russian Federation, hereinafter referred to as the Parties, in an attempt to strengthen European energy security through the diversification of natural gas routes in European markets, with the intention of strengthening mutually beneficial cooperation to ensure the stability of natural gas supplies to the Hellenic Republic from the Russian Federation, as well as the possibility of transporting natural gas to third countries in order to support a new gas pipeline system that will start from the Russian Federation and pass through the Black Sea and the territory of the Republic of Turkey, as well as through the territory of the Hellenic Republic as a transit country (Southern European Gas Pipeline), in order to provide natural gas to European countries, including the Hellenic Republic, in order to create favorable conditions for the design, construction and operation of the Southern European Gas Pipeline in accordance with current legislation, taking into account international agreements and organizations of which the Hellenic Republic and the Russian Federation are parties or members, and in particular the Agreement of June 30, 1993 on the promotion of and mutual protection of investments, the Agreement of 26 June 2000 on the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and capital, and the Agreement of 29 April 2008 on cooperation in the construction and operation of a gas pipeline in the territory of the Hellenic Republic, agreed on the following:

Article 1

The terms used in this memorandum (including the preamble) have the following meaning:

• “Southern European Gas Pipeline” means the section on the territory of the Hellenic Republic of the new gas pipeline system defined in paragraph 4 of the preamble of this memorandum;
• “Project” means the design, financing, construction, operation and maintenance of the Southern European Gas Pipeline, which will consist of pipelines, compressor stations, and other infrastructure necessary for the operation of the Southern European Gas Pipeline;
• “Constituent Parties” – a Greek founder, who will be determined by the Greek side, and a Russian founder, who will be determined by the Russian side, for the purpose of joint creation “Special Purpose Companies”;
• “Special Purpose Company” means a company to be formed by the constituent parties in Greece and Russia, under a jurisdiction to be agreed upon by the constituent parties, for the purpose of completing the Project.

Article 2

1. The Parties will facilitate the implementation of the Project by the Special Purpose Company, including facilitating all processes to ensure that the construction phase of the Project begins in 2016 and the launch of the Southern European Gas Pipeline begins before the end of 2019.
2. The Parties will cooperate with each other to ensure stable, transparent and non-discriminatory conditions for the implementation and implementation of the Project.
3. The parties are not responsible for any actions of the Special Purpose Company and the founding parties in relation to the implementation and execution of the Project.

Article 3

1. The Russian side will assist the Special Purpose Company in obtaining the necessary financing for the implementation and execution of the Project in accordance with the results of the feasibility study, which will be developed after the signing of this memorandum, and this financing will be provided with a guarantee of economic benefits from gas transit through the Southern European Gas Pipeline.
2. The parties will facilitate the Special Purpose Company to enable third parties designated by the Russian promoter to reserve up to 100% of the pipeline capacity for volumes of gas that will pass through Greek territory, between the entry and exit points of the Southern European Gas Pipeline.
3. The Greek side will provide all necessary legal support for the timely completion of all necessary procedures for the Special Purpose Company to obtain all relevant licenses or studies required by current legislation, including licenses relating to the route of the Southern European Gas Pipeline, construction, environmental and operating license, as well as connection to the Greek gas transportation system and connections with gas systems of third countries.

Article 4

1. The Southern European Gas Pipeline will have an annual capacity of up to 47 billion cubic meters of natural gas at the entry point of the Hellenic Republic. The route and exact technical parameters of the Southern European Gas Pipeline, including pressure, pipe diameter, etc., will be determined on the basis of a feasibility study.
2. The Greek side will grant the Project the status of a national priority project or equivalent status.

Article 5

1. The special purpose company will be the owner of the Southern European Gas Pipeline.
2. The Special Purpose Vehicle and the founding parties will be solely responsible for the cost of implementation and execution of the Project, including the cost of establishing the Special Purpose Vehicle and the above-mentioned feasibility study which will determine the technical and economic parameters of the Project, in proportion to the participation of the founding parties in the authorized capital of the Special Purpose Vehicle.
3. The founding parties of the Special Purpose Company (shareholders) will have the following shares on the day of its creation: the Greek founder 50% and the Russian founder 50%.
4. New shareholders may be invited to the Special Purpose Company by a joint decision of the founding parties, based on the principles of management of the Special Purpose Company.

Article 6

The parties agree that, if necessary, they will begin the necessary procedures for the appropriate modification of the Agreement between the Government of the Hellenic Republic and the Government of the Russian Federation, signed on April 29, 2008 on cooperation in the construction and operation of a gas pipeline on the territory of the Hellenic Republic.

Article 7

1. Disputes concerning the interpretation or application of this memorandum will be resolved diplomatically.
2. This memorandum comes into force after it is signed by the Parties.
3. This memorandum may be amended with the written consent of the Parties.
4. This memorandum does not constitute an international agreement or any other legally binding instrument and, therefore, does not create rights or obligations governed by international law.

Signed in St. Petersburg on June 19, 2015 in 2 copies in Greek, Russian and English. In case of disagreement in the interpretation of the terms of the memorandum, the English text will prevail.

From the Ministry of Energy of the Russian Federation

Alexander Novak
Minister of Energy

From the Ministry of Industrial Reconstruction, Environment and Energy of the Hellenic Republic

Panagiotis Lafazanis
Minister of Industrial Reconstruction, Environment and Energy.

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