The information wars around competing pipeline projects to take gas from the Caspian Sea basin into Europe have intensified, reflecting the crucial period for final investment decisions.

The basic opposition that exists, despite occasional disclaimers from various quarters, is between the Nabucco pipeline supported by European Union, which is planned to pass through Azerbaijan, Turkey and Southeast Europe to Central Europe, and Russia-sponsored South Stream project. The proposed route of the second has continually been revised over the years, reflecting the absence of complete feasibility study.

As now planned, the South Stream route would go from Russia under the Black Sea to either Romania or Bulgaria (still not finally decided), then through Serbia and Hungary into Austria, possibly with one or two spurs passing through Slovenia. Several years ago, it had been conceived that a separate South Stream branch would trace a route through Serbia, Hungary and Slovenia into Italy. Supply to the Italian market that is now being considered instead through a separate Balkan spur into Greece, across the Peloponnesus, under the Ionian Sea to the heel of Italy's boot.

Russia wants to reinforce its position on the European market, to limit access for its competitors and to maintain its control over gas exports from the Caspian region. Talks with Central Asian countries and signed agreements are intended to limit the availability of gas, which could be exported to the West independently of Moscow. The definite decision-making procedures of Russia and its strong influence on South-Eastern European countries provide an advantage to South Stream. Russian dominance in production is expected to further increase, while substitutability between producers and overall reliability of production will decrease due to the increase of Russian domination.

South Stream is a reaction to European Union desire to establish direct Caspian Sea – Middle East – EU southern gas corridor, primarily through Nabucco pipeline. Given that Nabucco would eventually take quantities of natural gas from Turkmenistan to Europe, South Stream project has been correctly viewed as a blocking move by Russia against Nabucco - same as Russian-Turkish Blue Stream gas pipeline under the Black Sea several years ago successfully blocked Trans-Caspian gas pipeline project (directed from Turkmenistan through Azerbaijan and Turkey to Europe).

As a result of the proposed South Stream spur through Greece into Italy, EU began encouraging Nabucco consortium to consider merging with Italy-Turkey-Greece Interconnector (ITGI). ITGI actually comprises two interconnectors: Interconnector Turkey-Greece (ITG) that already runs 295 kilometers connecting two above-mentioned national networks, and Interconnector Greece-Italy (IGI), which is on hold. Upon completion, the latter would run 800 km, including 215 km down the floor of the Ionian Sea.

The possibility must be considered that South Stream's idea of a spur through Greece to Italy is a bluff, because Italy's gas market is already oversupplied. In objective terms, the idea of this spur distracts attention and creates uncertainty during a crucial period leading up the Nabucco project's final investment decision.

However, IGI is at a bit of disadvantage here: it would depend on the Turkish natural gas pipeline system including the notorious Ankara bottleneck, whereas Nabucco would construct a new pipeline; also, it conceded to Turkey 15% lift-off provision that Nabucco consortium successfully resisted.  Nabucco – IGI hookup would solve IGI's transit problems in Turkey; allow it to source gas from northern Iraq (and eventually Turkmenistan) in addition to Azerbaijan's Shah Deniz Two.

Still more striking, Nabucco-IGI cooperation would create a gas pipeline ring comprising Central and Southeast Europe plus Italy and Greece. The ITGI leaders resisted this idea when it was first floated, but now they say there is no obstacle in principle to booking capacity for itself through Nabucco.

At the same time South Stream is a key to the maintenance of Russian political and economic leverage over Europe. South Stream will enable Russian influence to expand in southern Europe. It would provide Russia with surplus transit capacity, which is important to the fulfillment of Moscow wish to set gas prices in Europe—a wish shared by the potential members of Putin's ‘gas OPEC’, such as Iran, Venezuela, Qatar and Algeria.

The main purpose of South Stream gas pipeline project is to prevent Nabucco and TGI from transporting Caspian gas directly to European markets without its involvement. Gazprom itself will determine the rules by ensuring a long-term gas commitment to its pipelines from Turkmenistan as well as from Azerbaijan, Kazakhstan and Uzbekistan, thereby preventing direct Caspian – Europe connection by reason of excess capacity lack.

South Stream construction would have detrimental economic and political effects on Europe, particularly on the states along the pipeline route, as well as on their immediate neighbors. Generally, the countries on and around South Stream planned route depend on Russia for 63 % of their natural gas imports. If Italy is excluded, this dependency jumps up to 85 %.

By contrast to South Stream, construction of Nabucco would decrease the level of dependence on Russian exports. While the overall potential of Nabucco is only 31 bcm per year - a relatively small amount in a Pan-European context - it would be highly important to such countries as Bulgaria, Austria, and Romania, which could see their dependence on Russian supplies cut in half. Moreover, shipping gas via Nabucco could be 30-40% cheaper than shipping it via South Stream. This would mean Nabucco will have a downward influence on the price relative to what it would be if only South Stream (and in general Russian) gas would be available in Europe. In other words, with Nabucco, Gazprom will be forced to sell its gas at Nabucco’s price. This would be clearly beneficial to European consumers, while denying Gazprom huge profit margins. In addition, the cheaper transport provided by Nabucco would make it more lucrative for suppliers such as Azerbaijan and Turkmenistan to contribute.

So, the following questions are put: whom South Stream construction will be profitable to? Why somebody urges to preserve political power and influence in prejudice of economic interests?  Who believes and maintains this bluff and who is going to stop it? What would win: well-being of the European people or economically unsound ambitions of Russian establishment?