Both projects are intended to provide additional gas shipments to European markets, bypassing the territory of certain transit countries, especially Ukraine, to prevent possible disruption of transportation. To date, project developers have gained significant advancement: the question of the environmental threat of Nord Stream is closed, and construction of the pipeline under the Baltic Sea is scheduled for April this year. The topic of South Stream, in turn, is updated against the background of the emergence of new participants: Croatia officially joined the project in the beginning of March.

Nord Stream
The pipeline worth of € 7.4 billion and a length of 1220 km will run from Vyborg (Russia) under the Baltic Sea to Greifswald (Germany). The design capacity of the pipeline is 55 billion cu m, consisting of two lines with a capacity of 27.5 billion cu m each. The Nord Stream AG consortium includes Russian Gazprom (51%), German Wintershall (20%) and E.ON Ruhrgas (20%) and Dutch Gasunie (9%).
Several recent events had some effect on accelerating realization processes of the Nord Stream project. On February 10, Russian Prime Minister Vladimir Putin took part in the Baltic Sea Action Summit in Helsinki, where issues of environmental protection of the sea, mainly in the context of the construction of Nord Stream, were discussed. Some Baltic countries continue to maintain a negative attitude towards the project, pointing to a "heightened threat" to the sea ecosystem. The author's of the project, in turn, express the opposite point of view, under which the pipeline fully meets all the requirements of environmental safety. In his speech in Helsinki, V.Putin noted that the operator of the project – the Nord Stream AG – has already performed appropriate expertise in the area over 40 thousand square km, costing around € 100 million. According to V.Putin, construction of the pipeline provides use of the most advanced and unique technologies.
According to experts, V.Putin's visit to Finland in fact launched the construction of the sea section of the pipeline. The Russian prime minister, in particular, stated that the construction of the first line of the pipeline on the sea area will begin in April this year, and first shipments through it will be made in September 2011. During talks with his Finnish counterpart Matti Vanhanen, V.Putin has also enlisted support of the Finnish side regarding receipt of the last permission from the municipal authorities in southern Finland soon.
It should be noted that earlier the government of Finland has issued two permits for Nord Stream: permission to use the Finnish exclusive economic zone and to provide seabed ammunition cleaning along planned pipeline route. However, in accordance with local law on the use of waters, there was required additional permission from local authorities.
On February 12, there was announced decision of authorities of the southern region of Finland, according to which the operator of the project is allowed to laying pipeline with a length of 374 km in the Finnish waters of Baltic Sea. Thus, Nord Stream received all necessary construction permits from the countries through the territorial waters of which the future pipeline will go: Russia, Finland, Sweden, Denmark and Germany.
An additional positive momentum Nord Stream has gained during a working visit of President Dmitry Medvedev to Paris in early March. During the visit, Gazprom CEO Alexei Miller and CEO of Gaz De France SUEZ Gerard Mestrallet signed a Memorandum on increasing deliveries of Russian natural gas and on the entry of GDF SUEZ into the Nord Stream project. According to the document, from 2015 Gazprom' supplies for GDF SUEZ will increase by 1.5 billion cu m per year. In total, for the needs of the French company 4 billion cu m of Russian gas will be transported annually through Nord Stream. In addition, share of GDF SUEZ in the Nord Stream AG will be 9% and it will be achieved by buying shares  of German Wintershall and E.ON Ruhrgas - in 4,5% from each. This deal is expected to be made until April 2010, ie before beginning of the construction of the pipeline.
Solution of problem of initial funding has become positive news for Nord Stream. On March 16, in London, Nord Stream AG signed an agreement with 26 banks for a loan in the amount of € 3.9 billion. According to the structure of funding, the credit will provide 70% of construction cost of the first branch of the pipeline, while the remaining 30% will be invested by company's shareholders in accordance with the size of their shares. Among the lenders are BNP Paribas SA, Commerzbank AG, Credit Suisse AG, Deutsche Bank AG, The Royal Bank of Scotland, Societe Generale, etc. As the company's press release noted, in funding are also involved export-credit agencies Sace (Italy) and Hermes (Germany), which provided guarantees amounting to € 3.1 billion. In addition, approximately € 800 million are provided as a syndicated loan without guarantees of export-credit agencies.
According to the shareholders of the Nord Stream AG, necessary funds for the construction of the second branch of Nord Stream (about € 2.5 billion) are planned to provide until the end of 2010. As experts note, special problems with crediting of the second phase of the pipeline should not arise: investors could be the same banks and financial institutions participating in the first phase of the project.
Participants of the deal are convinced that providing the loan has become an important milestone in the history of Nord Stream, promoting effective implementation of the project on schedule. Moreover, according to the Nord Stream AG, the capacity of the first branch of the projected gas pipeline has been already fully contracted.

South Stream
According to plans of the initiators of the project – Gazprom and Italian ENI – the € 25 billion worth pipeline will be laid under the Black Sea from Novorossiysk to the Bulgarian port of Varna, then  the pipeline will pass through two branches: via Greece to southern Italy and through Serbia and Hungary to Austria. The designed capacity of the 900 km long pipeline (in the sea area) is 63 billion cu m per year. According to plans, from 2015, after commissioning of South Stream, approximately 35% of the total volume of Russian gas supplies will be shipped to Europe.
In addition to Nord Stream, South Stream is also designed to diversify the routes of Russian gas supplies to European consumers, bypassing the "problem Ukrainian territory". Excepting option of laying gas pipeline through the Ukrainian waters of Black Sea, the Russian side is negotiating the construction of the pipeline on the territorial waters of Turkey. On January 13 following talks with Prime Minister of Turkey Recep Tayyip Erdogan, V.Putin said that permission from Turkey for the construction of the pipeline can be received before November 10 this year. The politician added that environmental assessment of the Turkish section is completed by 100%, and the geological and seismic works – by 85-90%. It should be noted that in August 2009 Russia and Turkey signed an agreement on the construction of South Stream through the exclusive economic zone of Turkey; and in October 2009, the Turkish government authorized the exploration on the Turkish side of Black Sea for the realization of South Stream.
Meanwhile, there is observed a geographical extension of the overland area of the pipeline. On March 2, during the visit of Jadranka Kosor to Moscow, the Prime Minister of Croatia, there was signed an intergovernmental agreement on cooperation in the establishment and operation of the South Stream gas pipeline on Croatian territory. The document provides for the establishment of the joint venture on a parity basis for the construction of the Croatian part of the pipeline. It is worth noting that similar agreements on designing relevant parts of the project abroad the Russian side has already signed with Bulgaria, Serbia, Hungary and Slovenia; it is also planned to sign a relevant agreement with Austria.
According to experts, connecting Croatia to the project is motivated by two considerations. First, Zagreb does not want to keep up with the neighbors (Slovenia and Serbia) to participate in major regional energy projects such as South Stream; and secondly, Croatia feels a need for increased supplies of Russian gas, which can be realized through South Stream.
However, the question of "Croatian route" remains open. Croatian experts consider option of building a second main branch from Serbia to Austria via Croatia and Slovenia. But South Stream does not include crossing of the Croatian territory: main route will go to Austria via Bulgaria, Serbia, Hungary and Slovenia. A.Miller explained that Croatia will join the pipeline with a branch from Serbia or Slovenia. The final route of the Croatian part of the pipeline will be defined after preparing of a relevant feasibility study.
It is noteworthy that Croatian involvement in South Stream is not the only sign of the observed trend of strengthening of positions of the project in European energy field. Romania and the Republic of Srpska are also declaring about their interest in participating in South Stream. Greece, in turn, confirms its readiness to sign an agreement with Russia to build the Greek section of the pipeline. According to Gennady Schmal, the president of the Union of Oil & Gas Producers of Russia, interest of southern European countries in the project is fueled by the fact that their economies begin to recover after crisis. This, in turn, contributes to an increase in energy demand taking into account the reliability of the transportation routes.
There is also on the agenda the question of joining of the Electricite de France (EdF) the South Stream AG – operator of South Stream, created on a parity basis by Gazprom and ENI. The memorandum of understanding between Gazprom and ENI, signed in early December last year, has secured agreement of the parties on acceding of EdF to the South Stream project.
In the context of the observed significant shifts in the framework of the Russian regional pipeline projects, notable position was announced by the Ukrainian side. In mid-January, the presidential candidate and now the head of state Viktor Yanukovych expressed the interest of Kiev to participate in the Nord and South Stream projects. This step is explained by desire of Ukraine to offset losses from reduced levels of Russian transit gas to Europe in case of successful implementation of these projects. In addition, the Ukrainian leader suggested returning to the idea of creating a consortium to manage Ukrainian gas transport system with the participation of European and Russian energy companies. Details of the Ukranian proposals has not completely investigated yet, although it is clear that they are aimed at preserving the traditional key role of Kiev in the Russian-European gas trade. Gazprom took into account statements of the Ukrainian leader, but at the same time made it clear that implementation of the Nord and South Stream projects in any case will be continued.
Against the backdrop of intensified efforts around the Nord and South Stream, there was observed some activity around the competing western Nabucco pipeline project, which envisages transportation of energy resources of the Caspian basin to Europe, bypassing Russian territory. In early March, the European Commission announced its decision on allocation of € 2.3 billion for implementation of gas and electric power projects of the EU, € 200 million of which are designed for construction of the Nabucco gas pipeline. In addition, in April this year it is expected to sign strategic agreement between the EU and Turkmenistan, which is seen as an important resource base for the proposed pipeline.
Experts note that even though preparatory works for South Stream compared to the Nabucco are well advanced, the latter is not considered by EU leaders as the priority. In late February, the International Energy Agency (IEA) issued a release that Nabucco is a more effective means of improving the gas supply of EU countries than South Stream. As explained by the head of the IEA Nabuo Tanaka, it is important to diversify not only the supply routes, but also their sources. According to N.Tanaka, in contrast to South Stream, Nabucco proposes gas shipments of non-Russian origin, which determines the key role of Nabucco for the EU energy security, despite its relatively high cost.
Position of the IEA along with recent statements of Kiev can be interpreted as kind of response of opponents to the observed progress of foreign energy strategy of Russia in Europe. Apparently, intensification of Russian pipeline politics simultaneously incites processes of promoting alternative competitive projects. Persisting of current trend can potentially make significant changes in Eurasian map of continental gas supplies.

Azam Isabayev
Expert of the Center for Political Studies