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The world’s largest gas producer Gazprom began building the Serbian section of Russia’s South Stream natural gas pipeline last Sunday, a project to deliver Russian gas directly to Europe without going through the transit routes in Ukraine, a country seeing tensions with Russia.

Stretching about 450 kilometres, the Serbian section of the pipeline is expected to be completed in two years and begin shipping gas in early 2016.

Gazprom holds 51% of the joint venture for the project in Serbia, South Stream Serbia AG, and Serbian state-owned natural gas provider Srbijagas hold 49%.

Gazprom will fully finance the $2.7 billion project initially while Serbia will pay back its share using pipeline transit taxes upon operation.

Once completed, the South Stream pipeline will ship up to 63 billion cubic metres of natural gas annually from Russia, across the Black Sea, to countries in Central and Southern Europe such as Bulgaria, Serbia, Hungary, and Italy, and ultimately to Western Europe.

Russian President Vladimir Putin said that the South Stream pipeline will eliminate transit risks for Russian gas shipments and strongly consolidate international energy security. Pricing disputes between Russia and the transit country Ukraine in recent years have caused Moscow to halt gas supply to European consumers. Through bypassing Ukraine, the pipeline will ensure smooth sales of Russian gas to European nations.

The project will benefit Serbian economy by bringing about 20,000 jobs and an annual income of $135 million from transit taxes, Serbian Prime Minister Ivica Dacic said.