September 30, 2014 / 11:29 AM / 5 years ago

EU member states must enforce energy law opposed by Russia -draft

* South Stream project flouts Third Energy Package

* European Commission has asked Bulgaria to halt work

By Barbara Lewis

BRUSSELS, Sept 30 (Reuters) - EU member states must enforce a law to prevent companies such as Russia’s Gazprom dominating energy pipelines, said a draft document compiled ahead of EU leaders’ talks next month, as the bloc seeks to take a tough stance against Moscow.

Russian President Vladimir Putin has repeatedly attacked the so-called Third Energy Package, which forces energy companies to separate the ownership of transmission links if they use them to carry their own gas or power.

Crucially, it makes Moscow’s South Stream pipeline, designed to bypass gas transit nation Ukraine, illegal, since it would control the assets as well as the gas it transports.

The document seen by Reuters ahead of a summit of EU leaders in late October reaffirms “the urgent need for effective and consistent implementation and application of the provisions set out in the Third Energy Package”.

Bulgaria, one of the EU countries most at risk of a supply shortfall in the event of any disruption of Russian gas because of Moscow’s dispute with Kiev over unpaid bills, has said it has halted work on South Stream in response to pressure from EU regulators.

But it has gone ahead with raising capital for the pipeline that would ship Russian gas across the Black Sea to Bulgaria and beyond.

Gazprom at the weekend warned of possible disruption of Russian gas supplies to the EU, in spite of talks between the European Commission, Russia and Ukraine to try to settle the gas dispute between Moscow and Kiev.

The issue of South Stream has been mentioned on the margins of months of negotiations on the gas dispute and Russia has said the EU has been acting contrary to its own interests. It argues South Stream improves rather than reduces EU energy security because it cuts out the need to cross Ukraine.

Meanwhile, the EU is striving to cut dependence on oil and gas from Russia, which provides about a third of EU supplies. It also provides about half of Ukraine’s gas, but cut off its supplies in June because of unpaid bills.

The October summit of EU leaders in Brussels will address the bloc’s energy policy in general and how to diversify supplies.

Another paragraph of the draft document likely to irritate Russia stresses the need to reduce oil price indexation - a practice favoured by Russia of linking gas pricing to oil in long-term contracts, which critics say has inflated gas prices.

EU regulators are investigating Gazprom for anti-competitive behaviour, including in relation to gas pricing. (Editing by David Holmes)

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