The European Commission is to tell Serbia its accession prospects will suffer if it builds South Stream, a Russian gas pipeline.

It says in its annual enlargement report, out on Wednesday (8 October), that “the intergovernmental agreement signed between Serbia and Russia to build the South Stream pipeline is not compatible with the acquis [EU laws]”.

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“Serbia should not commence work on constructing South Stream until this agreement is aligned with the acquis”.

It makes the same point in a “strategy paper”, also to get published on Wednesday, which will shape accession talks over the next 12 months.

An EU source said the paper names “economic …competitiveness” as one of three conditions for progress in negotiations.

“We will make reference to the … importance of unbundling, price transparency, and third party access to [energy] transmission networks”, the source noted.

Under EU law, energy firms are not allowed to own both the fuel and its means of distribution in one bundle. They also have to let competitors use their pipelines to stop monopolies inflating prices.

Russia signed the South Stream accord with Serbia in 2008 and plans to begin construction this year.

It has signed similar agreements with EU states Austria, Bulgaria, Croatia, Greece, Hungary and Slovenia, as well as a memorandum of understanding with Republika Srpska, the ethnic Serb part of Bosnia.

The commission has warned the EU host countries they risk fines if they go ahead, prompting Bulgaria to halt construction.

Its leverage on Serbia, where South Stream is to bring €2 billion in foreign investment, is limited to the pace of accession talks.

“We are telling all candidate countries: ‘Listen: If you go ahead with South Stream, you are breaching EU legislation, which is not helpful, especially when you come to open the energy chapter in the accession talks”, a second EU official said.

Serbia has in recent years captured war crimes fugitives and began normalising relations with Kosovo in return for progress in its EU bid.

Its foreign ministry could not comment on Monday. But the EU leverage risks waning after incoming commission chief Jean-Claude Juncker said there will be no new EU members in the next five years.

The outgoing enlargement commissioner, Stefan Fuele, also noted on Monday that EU countries are suffering “enlargement fatigue”.

The EU acquis aside, Russia’s war on Ukraine has increased concerns over the politics of South Stream.

The pipeline is to bypass the EU-aspirant gas transit state, damaging its strategic importance, and to increase EU dependence on Russian gas.

The EU’s incoming foreign affairs chief, Federica Mogherini, said in her European Parliament hearing on Monday (6 October) the “political conditions are not right” for the project even if it complied with EU law.

An EU official told EUobserver that Brussels is unhappy Serbia did not join EU sanctions on Russia in what looks like a South Stream concession.

“We also have issues on Serbia’s non-alignment with EU foreign policy statements and actions”, the contact said.