Owing to its geographical proximity to Russia and a dominant position of Russian gas, The European gas market continues playing an important role in Gazprom’s export policy. Diversification of gas supply routes is a crucial element in reinforcing the security of this market.

In November 2006 Gazprom and Eni entered into the Strategic Partnership Agreement providing Gazprom with the opportunity to directly supply Russian gas to the Italian market starting from 2007. Gas supply volumes will be gradually increased to 3 billion cubic meters per annum by 2010. Under the Agreement the existing contracts for Russian gas supplies to Italy have been extended till 2035.

Gazprom and OMV signed a Cooperation Agreement on January 25, 2008 based on the Memorandum of May 2007. Under the Agreement Gazprom Group will acquire 50 per cent in the Central European Gas Hub (CEGH) located in Baumgarten. At present, the CEGH is wholly owned by OMV Gas International, a subsidiary of OMV AG.

Bulgaria is South Stream’s bridgehead to Europe even as Germany is for Nord Stream. South Stream will guarantee long-term gas supplies to Bulgaria, covering an anticipated two-fold increase in gas consumption by 2020, as compared to the consumption in 2007.

Bulgaria will profit considerably on the gas pipeline building, which means creation of jobs, development of infrastructure including the construction of UGS facilities.

Hungary and Russia signed an intergovernmental agreement on South Stream on February 28, 2008. Within this framework, a business deal was closed between Gazprom and Hungary’s Development Bank on March 10, 2009, establishing a jointventure to carry out a feasibility study and later build and operate the Hungarian section of the pipeline.

South Stream is of vital importance to satisfy Greece’s increasing energy demand, which is expected to double in the next decade.

Russia has been exporting gas to Greece since 1996. The supply contract provides for the delivery of 3 billion cubic meters of gas per year until 2016. In 2008 Greece consumed a total of 4 billion cubic meters and 2.85 billion cubic meters of this amount was delivered by Gazprom.

On June 17, 2010 during the meeting between Alexey Miller, Chairman of the Gazprom Management Committee and Gjorge Ivanov, President of the Republic of Macedonia the Macedonian party expressed its interest in receiving an increased amount of natural gas from Russia and joining the South Stream project.

The South Stream project also attracts the attention of other European nations. For instance, in 2008, Gazprom held several preliminary discussions with representatives of two Romanian companies, Romgaz and Transgaz, exploring the opportunity to develop the existing transit infrastructure and to build new capacities on the Romanian territory, taking into account the planned South Stream pipeline network running across South and Central Europe.

On January 25, 2008, the Russian and Serbian governments signed a general intergovernmental energy agreement anticipating the construction of a South Stream section via Serbia. The agreement was ratified by the Serbian Parliament on September 9, 2008, paving the way for Gazprom and Srbijagas to sign a cooperation agreement on February 25, 2008.

On November 14, 2009 on the basis of the Russian-Slovenian negotiations in the presence of Vladimir Putin and Borut Pahor the Government of the Russian Federation and the Government of the Republic of Slovenia entered into the Agreement of cooperation during the constriction and operation of the South Stream gas pipeline in Slovenia.

On November 27, 2009 Gazprom and Electricite de France (EDF) signed in Paris the Memorandum of Understanding on potential engagement of EDF in constructing the offshore section of the South Stream gas pipeline.

On March 2, 2010 Russia and Croatia signed in Moscow the Agreement of Cooperation for the South Stream gas pipeline construction and operation in Croatia.