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Putin to push South Stream pipeline on Austria trip

Russian President Vladimir Putin will seek to exploit disagreement between EU member states over a Kremlin-backed gas pipeline as he looks to seal Austrian support for the project during a visit to Vienna next week.

During the one-day trip on Tuesday Putin will oversee the signing of a shareholder agreement between Gazprom and energy firm OMV enabling them to press on with work to build a section of the planned South Stream pipeline in Austria, Putin’s top foreign policy aide said on Friday.

The Russian president is expected to use the opportunity to try to secure Vienna’s backing for the Gazprom-led pipeline after another EU member involved in the project, Bulgaria, suspended work on it earlier this month under pressure from the EU, said Putin’s foreign policy aide.

“The issue needs to be clarified,” Yury Ushakov told reporters. “It’s obvious that the topic will be discussed in this context. It’s a very important subject.”

With the deadly crisis in Ukraine showing no sign of abating, the multi-billion-euro pipeline intended to bring Siberian gas to Europe has become a new focus of tensions between Moscow and Brussels.

Moscow bills the pipeline as a recipe to ensure European energy security and has accused Brussels of pressuring Bulgaria into suspending work on South Stream in order to seek revenge over the Kremlin’s alleged role in supporting separatists in eastern Ukraine.

The European Union has called on all 28 member states to stand united in resisting pressure from the Kremlin over the project, saying the pipeline breaches the bloc’s competition rules.

But the EU appears deeply divided on the project with several member states, who depend on Russian gas transported via Ukraine, supporting it.

Serbian Prime Minister Aleksandar Vucic said last week his country, which is a candidate for EU membership, would press on with plans to build Serbia’s stretch of the pipeline.

Backed by Italy’s ENI and France’s EDF, the South Stream pipeline is a major project for reducing Moscow’s reliance on Ukraine as a transit country following disputes with Kiev in 2006 and 2009 that led to interruptions of shipments to Europe.

With a capacity of 63 billion cubic metres per year, the main pipeline will stretch nearly 2,500 kilometres (1,500 miles) from Russia under the Black Sea to Bulgaria, Serbia, Hungary and Slovenia to end in Italy.

Analysts said that while the pipeline will remain a hostage to persisting tensions over Ukraine, Austria could help salvage Moscow’s flagship project.

“Austria is a more prominent EU member than Bulgaria, its voice will be taken into account” said Valery Nesterov, an oil and gas analyst at Sberbank CIB.

After the latest round of EU-brokered talks collapsed, Russia earlier this week suspended gas supplies to Ukraine and warned Brussels that deliveries to Europe could be interrupted.

Moscow-based political analyst said Alexei Mukhin said Brussels appears ready to sacrifice its economic interests for the sake of teaching Russia a lesson.

“Europe needs South Stream,” he said. “But the European Commission will find a way to put it on ice.”

“The practicality of South Stream is obvious,” added Nesterov.

Separately, during his Austria trip Putin will meet for talks with OSCE current chairman Didier Burkhalter, OSCE Chairman-in-Office, to discuss the Ukraine crisis.