Russia adds final pieces to 'South Stream' puzzle 

Slovenia will sign the deal in June, Slovenian Economy Minister Matej Lahovnik announced in Ljubljana on 22 May. Austria's economy ministry also confirmed talks were ongoing, but declined to say at which stage the talks were. 

Despite the Nabucco rivalry, Russia also said it wants the European Union to make South Stream one of its 10 "priority projects" in energy policy, Russian Energy Minister Sergei Shmatko told reporters following an EU-Russia summit in the far eastern city of Khabarovsk on 22 May. 

"In the last two or three weeks, we've held a series of negotiations with Austrian and Slovenian partners about an intergovernmental agreement," Shmatko told reporters. 

"This document is at an advanced level of preparation." 

Austria and Slovenia would join Italy, Bulgaria, Greece and Serbia, from whom Russia last week secured support for South Stream in its bid to outpace the EU-backed Nabucco pipeline, which would supply gas from sources other than Russia. 

Shmatko said Russia and its European partners in the project would request that Brussels grant it priority status. 

"We agreed with EU Energy Commissioner Andris Piebalgs that Russia once more, together with its European partners in the project, would prepare a circular for the European Commission about affording the project such status," Shmatko said. 

Priority projects receive EU funding and are those that its executive thinks will diversify the bloc's energy sources or help energy flow more freely between member states. 

The EU reacted angrily to this winter's interruption of gas imports across Ukraine, and has since stepped up efforts to source more gas from North Africa, the Middle East and the Caspian region to dilute its reliance on Russia. 

However, its flagship Nabucco project has been delayed and is still awaiting a key agreement with transit country Turkey, as well as firm gas supply deals. 

Slovania's Lahovnik said Nabucco remained an important project for the EU, but added the question was whether there would be enough gas supply available for it. 

The Austrian economy ministry said that it did not view South Stream as a Nabucco rival: "Both pipelines are an amendment to the existing routes via Russia and Ukraine," a ministry spokesman said. 

A spokesman for the Nabucco consortium, which is led by Austria's OMV, also reiterated that the pipelines were not rivals and that every gas supply extension was welcome. South Stream is a joint venture of Russia's Gazprom and Italy's ENI. 

Moscow turns the screw on Ukraine 

In the meantime, Russia rejected a Ukrainian proposal to defer payment on up to $5 billion in gas storage payments as energy talks on Friday between the prime ministers of the ex-Soviet neighbours ended in stalemate. 

Russian Prime Minister Vladimir Putin dismissed the proposal by his Ukrainian counterpart, Yulia Tymoshenko, for Kiev to buy gas for its storage facilities in exchange for future transit fees that Moscow would pay to deliver gas via Ukraine. 

"The volumes are large. The timeframe for what would essentially be a loan is also large," Putin told reporters after the meeting, held on Friday. "We will not work under such conditions and with such big risks." 

President Dmitry Medvedev, attending an EU-Russia summit in the far eastern city of Khabarovsk on the same day, challenged European leaders to help Ukraine pay its gas bills and help avert a new gas crisis. 

The stalled negotiations also come a day after a Russian government source said Kiev and Moscow were on the verge of another gas crisis, a possible repeat of the dispute that left millions of Europeans without heating in the dead of winter this year. 

Growing list of grievances 

Speaking in Khabarovsk, EU External Relations Commissioner Benita Ferraro-Waldner admitted that EU-Russia relations had been damaged by last year's war in Georgia and the Ukrainian gas dispute. 

"There was indeed a rough patch in our relations," she stated, adding that Russia and the EU were now on better terms, a view echoed by Russian officials. 

"The mood in the room was not bad," one European official said of the talks, which included Czech President Vaclav Klaus, representing the EU presidency. 

EU leaders, however, struggled to convince Medvedev that a new Eastern Partnership was not intended to turn Belarus, Ukraine, Moldova, Georgia, Armenia and Azerbaijan against Russia. 

"What we don't want is the Eastern Partnership to be turned into a partnership that is against Russia," Medvedev said. 

Trade was high on the agenda, and a Kremlin foreign policy adviser warned that Russia was losing patience over its WTO bid after more than a decade of attempts to join the 153-member body. 

EU Trade Commissioner Catherine Ashton ruled out finalising a strategic pact with Russia before it joins the WTO, and warned Moscow against introducing protectionist measures. 

"WTO accession paves the way to the broader free trade agreement we need," Ashton said. 

"Russia needs to demonstrate it really is keen to move to WTO accession and part of that is not imposing any new duties, which in any event damage business," she adeed.

The strategic deal, intended to replace a 1994 pact, makes trade as a cornerstone of ties and is still under negotiation.