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Croatia Agrees to Join South Stream

Putin shaking hands with Kosor in Moscow on Tuesday, before holding talks on the South Stream gas pipeline. Alexei Druzhinin

Croatia on Tuesday joined the South Stream gas pipeline, further widening a project that already involves eight countries, following talks between Prime Minister Vladimir Putin and his Croatian counterpart, Jadranka Kosor.

Signed by Energy Minister Sergei Shmatko and Croatian Economy, Labor and Entrepreneurship Minister Djuro Popijac, the deal stipulates the construction of a spur to the Balkan nation from South Stream, work that will be done by a 50-50 Russian-Croatian company.

"The benefits are obvious for all involved in the project and for Croatia, which joined it today," Putin said in prepared comments after the signing ceremony. "They are the reliability of supplies and a boost for the economies."

Kosor stressed there was still some bargaining ahead, however. "Naturally, we will have more talks about the details," she said, speaking alongside Putin.

Russia has already signed an agreement on the South Stream pipeline with Bulgaria, Serbia, Hungary, Greece and Slovenia. Russia and Italy will build the stretch under the Black Sea. France's power group EDF agreed with Russia in December to take a stake in the project.

Gazprom deputy CEO Alexander Medvedev said Tuesday in an interview to Bloomberg that his company could reduce its stake below 50 percent to allow EDF in, although he declined to comment on the size of a possible reduction.

Croatia consumes 3.2 billion cubic meters of gas annually, producing 60 percent itself and importing the rest from Russia.

Croatia's previous government — headed by Ivo Sanader, who resigned in mid-2009 — declined Russia's proposal to join South Stream in 2007, instead pushing for an LNG project on the Krk island to get supplies from northern Africa.

In September, Croatia expressed interest in joining, and outgoing Croatian President Stjepan Mesic visited Moscow in December to discuss the plan.

On Tuesday, the Croatians also held talks about a new gas supply contract to replace the current agreement, which expires at the end of next year, Kosor said. Croatia is hoping to increase its purchases from Gazprom, she said, without giving the amount.

The countries agreed to continue discussions on a plan to connect the Druzhba and Adria oil pipelines, Kosor said.

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