Russia's president and the prime ministers of EU members Greece and Bulgaria attended the signing ceremony in Athens, describing the project as historic, beneficial for the three countries involved and for energy and environmental security in Europe as a whole.
The 280-kilometer (175-mile) Burgas-Alexandroupolis pipeline will carry Russian oil via the Bulgarian Black Sea port of Burgas and Greece's Alexandroupolis on the Aegean further to Europe, the U.S. and the Asia-Pacific region, and could cost up to 1 billion euros.
"The step we are taking today has been necessitated by the interests pursued by Russia and Greece, as well as our partners' interests," Vladimir Putin said before the ceremony, adding that the project would benefit all three countries.
Putin said the pipeline would allow Russia to diversify routes and increase energy exports.
He said it would also make the Balkan states major energy hubs in Europe, with storage facilities of 600,000 metric tons of crude both in Bulgaria and Greece, which would protect them against possible energy market fluctuations and enhance their roles in world politics, while also bringing tens of millions of dollars in transit fees.
"I am positive that Russia's energy potential and the favorable geographic positions of Bulgaria and Greece open up prospects for broad cooperation, and provide new opportunities to turn Bulgaria and Greece into large regional centers to transit Russian energy resources to European and world markets," Putin said.
Environmental risks considered
Greek Prime Minister Costas Karamanlis called the pipeline, which will pump 35 million metric tons of oil a year (257.25 million bbl), a volume that could eventually be increased to 50 million metric tons (367.5 million bbl), a historic project.
"This is a historic day. It is a milestone on the road toward new targets in the future, a result of close and useful cooperation," the premier said.
Karamanlis said the pipeline would be an alternative to the Black Sea route, would reduce environmental risks from oil spills, and help oil companies tackle the problem of costly tanker delays in the overcrowded Bosporus.
Putin also highlighted the environmental aspect, saying the latest technology would be used in construction and relevant norms observed. Activities of a consortium to run the project will be subject to EU legislation and local inspections, the president added.
Timeframe
Bulgaria's premier, Sergei Stanishev, said the construction should start no later than 2008: "We must maintain the high tempo we have set today."
Echoing the premier, Putin urged the start of the project, which he said would help increase crude supplies from the Caspian region, including from the U.S. oil giant Chevron-led Caspian Pipeline Consortium that supplies oil from the Caspian Sea to the Black Sea, as well as Kazakh and Azerbaijani producers.
Speaking at a news conference after the signing, the head of Transneft, Russia's pipeline operator that will have a part in the project, said the pipeline could come online in less than a year.
Semyon Vainshtok said a tender for a company to conduct the feasibility study and another one for an operator had to be held first and contractors selected, after which the approximate launch date could be determined.
Asked about the cost, the businessman only said the Balkan pipeline would be less expensive than the BP-led $4-billion Baku-Tbilisi-Ceyhan pipeline - which carries crude from Azerbaijan to Turkey bypassing Russia and is backed by the United States - as it would not run through mountainous areas.
The Burgas-Alexandroupolis deal was signed amid growing concerns among some European states over dependence on Russia - which meets about 30% of Europe's oil demand and 40% of its natural gas demand - and Washington's repeated accusations against the Kremlin of using energy as a political tool.
But European Commission Spokesman for Energy Ferran Tarradellas Espuny said Wednesday the project was a good example of cooperation with Russia in the energy sector, adding that investment in the project would also be attracted from private investors.
Russia's state-controlled oil producer Rosneft [RTS: ROSN], Transneft, and energy giant Gazprom [RTS: GAZP] will hold a total of 51% in the project, while Greece and Bulgaria will control 24.5% each.
Talks on the project, which have dragged on for 14 years over contentious financial issues, ownership and oil contributions, received a boost following Putin's interference and pressure last year.
