Putin's congratulations may be a bit premature. There are still a number of issues surrounding the proposed pipeline that have yet to be addressed. The biggest issue, in the middle of the shale gas revolution, is that the pipeline has a capacity that dwarfs any projected European need for Russian gas. Mikhail Korchemkin, founder and managing director of East European Gas Analysis, noted that once the annual 63 billion cubic meters of South Stream gas is added to Russian current capacity, Gazprom would have the ability to deliver 318 bcm to Europe, twice what the company has promised to Europe by 2020. "Gazprom has abandoned its guiding principle--sell gas before building expensive infrastructure," he said. These large infrastructure projects are beginning to pay a toll: Nordstream is only transporting 30% of its capacity, and Blue Stream is only at 37% of capacity, according to members of the Bulgarian right-wing opposition.
Gazprom currently lacks the supplies to build the pipeline. According to Jonathan Stern, head of the Natural Gas Research Program at the Oxford Institute for Energy Studies, Gazprom has not yet ordered pipe or organized barges for the pipeline. He predicts that the offshore section of the pipeline cannot begin until at least 2014.
The gas is being shipped to the European Union, and so the project must meet the demands of the European Commission. They have not done so, and European Union Energy Commissioner Guenther Oettinger did not attend the ceremony. Oettinger had previously referred to the pipeline as a "phantom project."
The Commission has, of course, read in the press that South Stream will pass through the Turkish economic zone in the Black Sea, make landfall in Bulgaria, and then proceed though Serbia, Hungary, Slovenia, Austria and Italy. The reaction from the EC has been telling. Guenther Oettinger's press spokeswoman Marlena Holzner said, "For the moment we have not seen a plan for South Stream. We take note of all the media reports but neither our experts nor Commissioner Oettinger have seen a plan where it says South Stream will start here, it will deliver gas to this entry point and it will go exactly following this route and it will deliver gas from Russia. We have not seen this." Holzner expanded her comments: "To the European Commission, it has never been communicated that there is a final route...There is no environmental impact assessment for the whole route. As far as we can see it, we don't regard this as a final investment decision."
By 16 February 2013, Russia needs to submit to the EC copies of the intergovernmental agreements it has negotiated with the transit states, and the EC then has nine months to express its concerns. In addition, before construction can truely get underway each country involved must submit both environmental impact studies, and social impact studies. Bulgaria, in particular, must submit an environmental impact study on the pipeline's landfall. Countries who are not party to the agreements but who are adjacent to the route also need to weigh in on a transboundary assessment. Russia appears to be aware of these issues, as the Russian-European Chamber of Commerce President Sergei Shuklin confirmed the 7 December ribbon cutting was only a signal of Russian seriousness about the project. "Everything will be concluded (according to EU legislation), especially since Russia just became a member of the World Trade Organization."
As of this writing, South Stream consists of two pieces of pipe welded together on Russian soil, with no permission to extend that pipe into European territory.
